Normally, you wouldn’t expect much movement in the stock of hundred-billion-dollar companies such as Alphabet Inc (NASDAQ:GOOG), but in 2015, the $500-billion company saw a big move in GOOG stock. In 12 months, the former Google stock’s price surged a whopping 44.5%, up from $524.95 to $758.88. Moreover, the upward trend could continue well into 2016 for Alphabet stock. Here’s why.
Google Stock: The Dominant Player in Every Game
You see, in the search engine business, Google is the undisputed champion. Since its introduction back in 1997, Google’s search engine has defeated every opponent that came in its way. According to the latest comScore report, “Google Sites” captured 63.9% of the core search market in the U.S. in November 2015. Its competitors, on the other hand, were on a much smaller scale: “Microsoft Sites” had a 20.9% market share, while “Yahoo Sites” had a 12.5% share of the total. (Source: “comScore Releases November 2015 US Desktop Search Engine Rankings,” comScore, December 16, 2015.)
Mind you, Google is much more than a search engine these days. The company even changed its name to Alphabet Inc to be less associated with its Google search engine. One of Google’s hyper-growth segments is its video streaming site YouTube.
According to Statista, Google was the leading multimedia web site in the U.S. in the number of visits in October 2015, with a massive 73.6% market share. In the same month, Netflix only had nine percent market share, while Hulu had less than three percent. (Source: “Leading Multimedia Websites in the United States in October 2015, Based on Market Share of Visits,” Statista, last accessed January 6, 2016.)
RBC Capital analyst Mark Mahaney has estimated that YouTube could bring as much as $7.0 billion in revenue for Alphabet in 2015. (Source: “Alphabet on its Way to $1000-RBC Capital’s Mahaney,” StreetInsider.com, December 1, 2015.)
And let’s not forget the company’s mobile operating system (OS) “Android.” International Data Corporation reported that Android was the absolute behemoth in the mobile OS industry, with 82.8% of market share in the second quarter of 2015. How much share did Apple Inc.’s (NASDAQ:AAPL) “iOS” OS have? 13.9%. Microsoft Corporation’s (NASDAQ:MSFT) “Windows” mobile OS captured only 2.6%, while BlackBerry Limited’s (NASDAQ:BBRY) “BlackBerry OS” had a tiny 0.3% market share. (Source: “Smartphone OS Market Share, 2015 Q2,” International Data Corporation, last accessed January 6, 2016.)
Note that despite Google’s enormous presence in these industries, the company has no problem adapting to the rapidly changing habits of consumers.
One of the major themes in the Internet industries is the shift towards mobile. Consumers are spending less time on their desktop computers and more time on smartphones and tablets.
How did Alphabet do in response to this trend? Tremendously well. In its most recent earnings report, the company reported that Google saw “substantial growth of mobile search revenue.” (Source: “Alphabet Announces Third Quarter 2015 Results of Google,” Alphabet Inc, October 22, 2015.)
Moreover, Google and Alphabet also dominated in mobile apps in 2015. According to market research firm Nielsen, five of the top seven apps in the U.S. in 2015 came from Google. (Source: “Tops of 2015: Digital,” Nielsen, December 17, 2015.)
The Bottom Line on GOOG Stock
At the end of the day, investors are looking for growth and existing success alone is not going to be enough. Luckily, Alphabet and Google are exploring many different fields, some of which might be huge for the company.
For instance, through its acquisition of Nest Labs last year, Alphabet has become a leader in smart home systems. “Google Nest” was part of the company’s expansion plan into the “Internet of Things” (IoT).
Moreover, Google has also started its own Internet service. Its ultra-high-speed Internet and TV service, “Google Fiber,” is already available in three metro areas and is expected to hit Los Angeles and Chicago next.
With its existing business going strong and new sources of growth being built, this could just be the start of a GOOG stock rally in 2016.