Is GOOG Stock About to Surge?
There’s a new clash of the titans in the technology sector which pits Alphabet Inc (NASDAQ:GOOG) in an epic face-off with Amazon.com, Inc. (NASDAQ:AMZN) Although Amazon currently has the lead, I suspect that GOOG stock is raring for a comeback.
Unlike the smartphone wars of the last decade, this competition has very little to do with end consumers. Google and Amazon are selling to other companies, which may explain why the conflict isn’t plastered across mainstream headlines. But, make no mistake, this conflict is very real, and it could drive huge gains for Google stock.
Both companies are trying to coax enterprise clients onto their cloud services. What that means is they build giant data centers, then lease out space on servers to other businesses. It makes sense for the clients because they only pay for how much space they use, and it makes sense for Amazon and Google because they need those data centers regardless.
Think about it: Google handles about 3.5 billion search queries a day. As a result, it needs a ton of servers to process that data. Likewise, there are hundreds of items being purchased on Amazon.com every second. These orders are just bits of information that flow from our computers to a data center somewhere. Amazon owns that data center.
At some point, it became obvious that Google and Amazon could make money off these data centers.
Amazon made this realization well before Google, much to benefit of AMZN stock. By contrast, advertising revenues are still the bread and butter for Google stock. Some might see that as a reason to stay away from GOOG stock, but I see the opposite.
I see a company with the scale and resources to pose a real threat to Amazon. I see Google stock priced way below that potential. And what I see makes me very, very bullish on GOOG stock.
Fuel for Google Stock
Every year, Gartner Inc (NYSE:IT) releases a research report on the state of cloud computing. Every year, Amazon wins. Not by a wafer-thin margin. No. Amazon wins by a mile, year after year after year. That being said, 2016 was the first time that two companies with deep pockets made some headway in closing that gap.
Microsoft Corporation (NASDAQ:MSFT) was a distant number two behind Amazon, and then there was Google. At first blush, third place doesn’t inspire much confidence in GOOG stock, but hear me out.
We know that Google can fight Amazon on price and performance; I don’t think those are significant worries. Some of best software engineers in the world work at Google. But the real concern is that Amazon has built products that truly help companies solve problems.
Google finally took a step to overcome that gap this week by paying $625.0 million buying Apigee Corp (NASDAQ:APIC) (Source: “Google drops $625 million on Apigee to chase Amazon and Microsoft in the enterprise,” recode, September 8, 2016.)
Diane Greene, Google’s enterprise czar, described Apigee this way in a statement: “They’re the hubs through which companies, partners and customers interact, whether it’s a small business applying online for a loan or a point of sale system sending your warranty information to the manufacturer.”
Basically, Apigee helps corporations build back-end software for their apps. It’s unsexy but crucial work that comes with a big paycheck. By adding Apigee to its stack of enterprise offerings, Google is doing more than just throwing down the gauntlet; it is chucking the gauntlet straight at Amazon’s head.
Enterprise clients are desperate to get their hands on Apigee’s software, so this could be a major win for GOOG stock. The company still has a long way to go before unseating Amazon as the “King of Cloud Computing,” but there’s no doubt this could be big for Google stock.
On a tangential note, investors should look more closely at the suppliers to these data centers. There’s one stock in particular that is stacking up enormous returns. This company manufactures microchips unlike anything else we’ve ever seen! It has accumulated triple-digit gains in each of the last two years, and we believe that’s just the tip of the iceberg. Click here to learn more about this once-in-a-lifetime investment opportunity!