Alphabet Inc: “Triple Threat” Could Send Google Stock Skyrocketing
Back Up the Truck on Google Stock?
I’m a big believer in the power of products. Companies like Alphabet Inc (NASDAQ:GOOG) are able to drive monster gains in their stock prices because customers love what they offer. In other words, GOOG stock depends on successful products.
We often think of stocks and companies as two separate things, but they’re really just two sides of the same coin. That’s the entire point of the market: to place a fair price on the value of a company’s stock. Finding underpriced stocks is how investors can get rich.
But that part is harder than it sounds. It’s incredibly tough to spot which stocks are trading on the cheap and which ones are genuinely crashing. There’s risk in betting one way or the other, but the “Power of Products” strategy has proven successful.
Time and time again, the best-performing stocks are driven by companies that deliver the best products. For instance, Amazon.com, Inc. went public in 1997 at $18.00 per share.
Since then, the company has rarely declared profits, but AMZN stock has soared 7,621.33%. Why do you think that happened? The price-to-earnings ratio wouldn’t have supported that kind of valuation, nor would all the other traditional metrics.
The only thing that explains this kind of extraordinary growth is the popularity of Amazon’s products. People love shopping on Amazon’s web site so much that brick-and-mortar businesses started closing their doors. They couldn’t compete with the e-commerce giant.
So, my point is that the “Power of Products” strategy actually works. I’ve seen it play out with companies like Apple Inc., Netflix, Inc., and Facebook Inc. Anyone who invested in those companies early on did so because of the strength of their products.
And guess what? Those people are probably millionaires today, sitting on a beach with a piña colada in one hand and a fist full of dollars in the other. If you want to join them on the beach, below are three factors that form the triple threat that could send Google stock soaring:
1. Daydream
Maybe you’ve heard of Google’s “Cardboard” virtual reality (VR) headset. It was an inexpensive option that Google used to generate enthusiasm for virtual reality. After all, most people didn’t quite know what to expect from VR. Cardboard gave consumers a chance to try it at a low cost.
Now the industry is heating up and Google is launching “Daydream,” a fully enabled VR headset that will fit seamlessly into the “Android” operating system. This is an incredibly important feature that seems to be lacking in other VR offerings. Other offerings appear to be standalone products, whereas the Daydream would be linked to your smartphone, tablet, and laptop browser. If someone sent you a text message, it would pop up on your view screen.
Also, in true Google fashion, the company isn’t hoarding the technology for itself. Google will partner with other hardware makers to build competing headsets, thus dividing its proverbial eggs between several different baskets. I am confident Google is going to make a killing in VR, which can only mean that GOOG stock is headed skyward. (Source: “Inside Daydream, Google’s New VR Ecosystem,” Fortune, June 1, 2016.)
2. Driverless Car
As of right now, driverless technology is one of the hottest sectors in Silicon Valley. There are Chinese companies with more than $1.0 billion in funding trying to challenge Tesla Motors Inc in self-driving cars. Meanwhile, they all seem to have forgotten which company pioneered driverless tech in the first place: Google. In fact, I think Google is poised for a major win in this race.
Google’s cars have been zooming around California for years, racking up mileage and experience. Not only that, but the company is looking to license the technology, rather than build its own car. Manufacturing automobiles costs a fortune and the margins are nothing to write home about. By partnering with major automakers like Fiat, Google can rake in the dollars without investing a ton of capital. Thick margins and virtually unlimited scope in this sector could provide staggering returns for GOOG stockholders. (Source: “Google and Fiat Chrysler announce driverless cars deal,” BBC News, May 3, 2016.)
3. Google Cloud
Earlier in this article, I used Amazon as a reference for the “Power of Products” strategy. I said the company rarely declared profits, and that’s definitely been the case for most of its history—until recently. Amazon has spent the last several quarters in the black, mostly because of one segment: “Amazon Web Services.” The firm’s cloud-computing arm has become its most successful project to date.
Now Google is looking to emulate that strategy with its own cloud-computing arm. It’s a high-margin, high-demand business that needs a lot of servers and programmers. Um, that’s right in Google’s wheelhouse. I see this segment lifting GOOG stock by the double-digits in the next 24 months. (Source: “Can Google catch Amazon and Microsoft in cloud?,” CNBC, March 23, 2016.)
People think the ticker symbol and financial ratios tell them everything they need to know about a company, but nothing could be further from the truth. Those only tell half the story. The other half, the “Power of Products” story, is what you could use to get rich on the stock market.
