Google Stock: Alphabet Game Changer Could Translate into 42% Gain

google stockGOOG Stock on Target for Major Move

Alphabet Inc (NASDAQ:GOOG) just announced a potential game changing move that could vault the stock price toward the $1,000 level within the next two years or sooner.

While Alphabet has some of the world’s top engineers and is progressing rapidly in its key artificial intelligence (AI) segment that could eventually control many of the devices in everyday life, something just happened that could really pay huge dividends for Google stock.

Most of you have probably been on Alphabet’s “YouTube” web site. If you are like me, you’ll think that the platform is amazing, broadcasting almost anything you want to watch.

And the most astounding thing is that Alphabet paid a mere $1.65 billion for YouTube in November 2006. Started by three ex-PayPal Holdings Inc (NASDAQ:PYPL) employees, the video site now serves billions of users and has massive amounts of bandwidth.

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Yet, while the YouTube service is great, the problem has been the inability of Alphabet to monetize its large user base and drive revenues from the site, until now.

GOOG Stock Could Soar

In a strategy that many say has been long overdue, Alphabet will introduce its own YouTube streaming TV service in major cities nationwide.

The service will cost users $35.00 per month, which is in line with what AT&T Inc. (NYSE:T) charges for its “DirecTV Now” streaming TV service. Yet the initial rollout of YouTube TV will encompass only 40 TV channels, versus more than 100 channels for DirecTV Now.

As it is only the start, and there will likely be numerous product modifications from Alphabet along the way, I’m not concerned with the inferior lineup to begin with.

You cannot bet against the folks at Alphabet and, with over $80.0 billion in net cash, the company has both the resources and time to develop a great streaming product.

And while the new service will likely not challenge Netflix, Inc. (NASDAQ:NFLX), given the current format and price point, YouTube will try to reach out to the millions of people who currently pay for overpriced cable TV service. This could be a massive move by Alphabet if it can swing cable subscribers to its cheaper service.

In addition, don’t forget that Alphabet is also developing AI technologies that could make its YouTube TV product a superior offering to shoppers.

The forward revenue picture looks impressive with Alphabet predicted to ramp up revenues by 17.2% to $105.81 billion in 2017 and 15.6% to $122.31 billion in 2018. (Source: “Alphabet Inc. (GOOG),” Yahoo Finance, last Accessed March 3, 2017.)

On the below chart, you will see that GOOG stock price is heading toward the $1,000 level. It is not a matter of if, but when, in the case of Alphabet stock. A 17% rise in Alphabet stock is within reason.

google stock chart

Chart courtesy of StockCharts.com

The forward valuation supports a higher share price. Trading at 21 times its 2018 earnings and a price/earnings to growth (PEG) ratio of 1.28, Alphabet stock is clearly underappreciated, and demands a higher multiple and PEG than is currently assigned by the market.

For instance, even a multiple of 30 times is reasonable, implying price of $1,185 or 42% from current levels, so the idea of a $1,000 price is attainable.