The Upside for GOOG Stock
Alphabet Inc (NASDAQ:GOOG) is often thought of as a blue-chip stock, a fortress of value that can weather any downturn or turmoil. Obviously, this relative safety draws in a ton of low-risk investors for GOOG stock, but I think it could be a growth play as well.
After all, Google is no ordinary firm. It has distinguished itself as one of the weirdest and most delightful companies on the market. Most companies have just one growth phase before the business matures, but not Google.
In fact, there’s a great story from the company’s early days that shows why it is capable of reinventing itself time and time again.
Every firm submits a form to the Securities & Exchange Commission detailing the risks to their businesses. The SEC thinks investors have a right to that information, and I agree. But as you would expect, most companies fill up their forms with a bunch of legal jargon that no one can decipher.
Not Google, though. Co-founders Larry Page and Sergey Brin decided to write those forms in plain English as a letter to shareholders. “Google is not a conventional company,” the letter started. “We do not intend to become one.” (Source: “Google Inc. Form S-1 Filing,” Securities & Exchange Commission, April 29, 2004.)
Right off the bat, Google showed that it couldn’t be lumped in with other blue-chip stocks. Written into the firm’s DNA was a willingness to innovate and improve.
“We have designed a corporate structure that will protect Google’s ability to innovate and retain its most distinctive characteristics,” the letter continued. “We are confident that, in the long run, this will bring Google and its shareholders, old and new, the greatest economic returns.” (Source: Ibid.)
When GOOG stock premiered on the NASDAQ in August 2004, it was trading at roughly $50.00 a share. After a three-year run, during which investors gained 604%, the recession knocked America’s economy off course. Google stock tumbled.
But by late 2008, the company found its footing and started a 407.5% climb to its current level of $744.27 (at the time of writing). That’s two periods of massive growth that don’t even include the original surge from startup to the company’s initial public offering.
In that time, Google went from being the world’s largest search engine to the leader in online advertising. It also built a whole range of products and services that are used on a daily basis, from “Google Docs” to “Google Translate.” And let’s not forget “Android,” the smartphone platform that became the most ubiquitous on Earth.
The company’s creative brilliance built huge fortunes for its co-founders, but they were more interested in continuing to grow the company than retiring on a beach somewhere. They have also delivered on the promise never to let Google become a conventional company.
Remember the name change to Alphabet? Casting aside a valuable brand name is definitely unconventional. Any other firms would have just sat back and raked in cash, but Larry and Sergey insisted on restructuring the company to keep its innovative streak alive.
They wanted to make it easier for the company to expand into completely unrelated fields like driverless cars and Wi-Fi-emitting balloons. Adding those lines could easily take Alphabet to the next level, turning it into a trillion-dollar company.
From where I’m standing, it’s obvious that GOOG stock is gearing up for another round of massive gains. It is one of the only big firms capable of that kind of growth.