This Could Send Google Stock Soaring
Alphabet Inc (NASDAQ:GOOG), formerly Google, has always been known to be a search engine company. I mean, the name “Google” actually became a verb meaning to find information using an online search. In fact, one of the reasons for the name change was that the name Google was too heavily associated with search, which isn’t the company’s online line of business.
If you take a look at what the company is working on now, you’ll see that its projects range from smart home systems to fiber optic Internet, driverless cars, and more. Some of the projects are already well underway and could become new sources of growth for GOOG stock, offering a boost to the GOOG stock price.
Sure, most of Google’s revenue still comes from its search ads business. In fact, among the $18.6 billion in revenue the company made in the third quarter of 2015, $16.7 billion came from advertising. (Source: “Alphabet Announces Third Quarter 2015 Results of Google,” Alphabet Inc, October 22, 2015.)
But there’s more to Google than just a search engine and ads. Starting next January, Alphabet will report two different sets of earnings, one for Google and one for its “other bets.” Among “other bets,” you’ll find “Google Fiber,” life sciences, self-driving cars, and other ambitious projects.
Google Nest: The Internet of Things (IoT)
When you talk about smart home systems, “Google Nest” often comes to mind. Last year, Google spent $3.2 billion to buy Nest Labs, the maker of the “Learning Thermostat.” It was part of Google’s expansion plan into what’s called the “Internet of Things” (IoT), or the move to make everyday devices connect and communicate with each other via Internet connectivity.
Nest has been the pioneer in IoT. The Nest Learning Thermostat just received a redesign and is now in its third generation. It is a self-learning, Wi-Fi-enabled, optimized heating and cooling system for homes and businesses that helps to conserve energy. Other than the Learning Thermostat, the company has also introduced the “Nest Protect” smoke and carbon monoxide detector and the “Nest Cam” security camera to its product lineup.
Google Fiber: One Gigabit Internet
Other than helping with temperature control in your home, Google is also providing Internet services. The company introduced its ultra-high-speed Internet and TV service, Google Fiber, in 2011. Google Fiber delivers Internet speeds of up to one gigabit per second and is currently available in three metro areas: Kansas City; Austin, Texas; and Provo, Utah. On Tuesday, December 8, 2015, the company announced that it would bring Google Fiber Internet service to Los Angeles and Chicago, the two biggest cities Google has worked with to date. (Source: “Exploring Fiber for Chicago and Los Angeles,” Google Fiber Official Blog, December 8, 2015.)
Mind you, projects like Google Fiber are going to be capital-intensive for the company. Analysts are predicting that the Internet and TV service will cost Google as much as $2.0 billion next year.
There is also competition in the fiber Internet business. AT&T, Inc. (NYSE:T) is on its way to expand its fiber Internet availability to 56 metro areas, including markets such as Detroit and Los Angeles, and offers similar speeds. (Source: “More AT&T customers will soon get access to its fastest broadband option,” CNET, December 7, 2015.)
The Bottom Line on GOOG Stock
Despite the challenges faced by Alphabet’s “other bets,” these projects have one thing in common: great potential. And that’s exactly what Alphabet Inc needs from them. Google’s search engine business, while being the king of the hill, is still growing; the “other bets” are there to provide further sources of growth. If some of them turn out to be fruitful, GOOG stock’s price will likely get another boost.