Google Stock: Analyst Issues Warning for Alphabet Inc Shareholders

Google StockIs This Bad News for Google Stock?

Shares of Alphabet Inc (NASDAQ:GOOG) have soared since the company’s initial public offering (IPO). But according to one analyst, the best days for Google stock may be behind it.

On Tuesday, Alphabet bumped Apple Inc. (NASDAQ:AAPL) off its throne to become the most valuable company. Shares surged 4.7% midday after reporting better-than-expected earnings. The rise took Alphabet’s market capitalization to $548 billion, besting Apple’s $534-billion valuation.

Is this good news for Alphabet shareholders? Not necessarily. According to Ned Davis Research technical strategist Will Geisdorf, the answer is a resounding no.

In a tweet posted Tuesday, Geisdorf highlighted that stock of the world’s most valuable companies have actually underperformed the S&P 500 since 1972—by a significant margin. An investment in the S&P 500 would have increased about 63-fold compared to about five-fold by holding stock of the most valuable company.

The reason for this is simple. When a company becomes so big, it becomes harder to grow at the same pace it did when it was smaller. Finding new revenue streams also becomes a challenge as growth from existing revenue streams start to plateau.

One only has to take a look at the performance of International Business Machines Corp.’s (NYSE:IBM) and Microsoft Corporation’s (NASDAQ:MSFT) stock performance in the 80s and 90s respectively after becoming the stock market’s largest companies.

The pattern is bad news for owners of Google stock. If true, it means the company’s best days are behind it.