Will Google Stock Gain from Trump’s Policies?
Stock markets are in turmoil the world over as Donald Trump has emerged as the unexpected winner in the U.S. presidential election. The sentiment across the globe is quite negative at the moment, as there is no clarity on Trump’s trade and finance policies.
However, there is one area where Donald Trump has been pretty consistent, and that is his preference for lower taxes. Trump had proposed reducing the business tax rate from 35% to 15% and also called for a repatriation holiday of 10% for companies with more than a trillion dollars parked overseas. This was taken well by the markets.
Mark Grant, Chief Fixed Income Strategist at Hilltop Holdings Inc. (NYSE:HTH), was the one to state that in the case of a Trump surprise, buy equities. Trump’s proposed tax cut, which would reduce the rate to 15%, “would just be a tremendous boom for corporate earnings in the United States.” (Source: “Strategist Mark Grant: In the case of a Trump surprise, buy equities,” CNBC, November 8, 2016.)
Top technology companies with huge amounts of cash overseas include Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and International Business Machines Corp. (NYSE:IBM). Although lower taxes is good news for companies, there are many other issues that will determine the future course of these technology stocks.
GOOGL stock is one technology stock that stands to gain or lose a lot, depending on how Donald Trump builds the United States’ relationship with China.
Alphabet Inc, otherwise known as Google, is planning to re-enter the Chinese market after closing its operations in 2010 over cyberattack and censorship issues. The company has been talking to government officials and handset makers and developing a version of its “Google Play” app store that includes only apps and services approved by the Chinese government. This app store would come installed on new smartphones made for the Chinese market that run on Google’s licensed version of “Android.” (Source: “Google Pursuing a Return to China,” The Wall Street Journal, September 4, 2015.)
Although China has a totally different Android ecosystem which could be hard to crack for the company, Alphabet Inc/Google stands a good chance once it gains access to the world’s second-largest economy through its Google Play store and Android phones. This would result in a huge revenue boost, and would buoy GOOGL stock.
In the company’s absence, Apple has become a leading player in China. Alphabet Inc aims to break this dominance through its newly launched “Pixel” phone.
As Alphabet Inc looks forward to the success of its new Pixel phone, virtual reality (VR) headset, and “Google Home,” China is one market that cannot be ignored. If the company is able to manage a decent success in the market, it would translate to huge gains for GOOGL stock. However, if Donald Trump does not work constructively on the U.S. relationship with China, the ambitions of Google stock will likely take a hit.