YouTube TV Multiplies the Potential of GOOG Stock
Alphabet Inc (NASDAQ:GOOG, GOOGL) stock is yet to recover from the jolt it received in January after announcing its quarterly results. Google stock hit a high of $835.67 before the earnings announcement. However, GOOG stock has been losing ground since then, and closed at $823.21 on Tuesday.
But this does not mean that GOOG stock has lost its sheen. On the contrary, Alphabet Inc has just made an announcement which proves that the company has a number of aces up its sleeve. The search giant that also owns “YouTube” has unveiled its own streaming service, “YouTube TV,” which will offer about 40 channels for $35.00 a month.
On Tuesday, Google parent Alphabet announced that the company is bringing the best of the YouTube experience to live TV by launching its streaming service. As detailed in YouTube’s official blog, this is what YouTube TV offers:
1. Live TV streaming from ABC, CBS, ESPN, FOX, and NBC, besides the regional sports network and other popular cable networks. This means that viewers will be able to enjoy shows like The Big Bang Theory and Empire as well as live sports events.
2. A cloud digital video recorder (DVR) with unlimited storage. This means that, with YouTube TV, viewers can record live TV and never run out of storage. With cloud DVR, there would be no limit to the number of shows that can be recorded.
3. YouTube TV works on any screen, be it mobile, tablet or computer. Viewers will be able to easily stream using Google “Chromecast.”
(Source: “Finally, live TV made for you,” Official YouTube Blog, February 28, 2017.)
There are a few more benefits as well. Every YouTube TV membership will come with six accounts, and viewers can watch all the “YouTube Red” original movies and series on the app.
This streaming service becomes the latest entrant that aims to tap the whole generation of cord-cutters. It competes with services like “Sling TV” by DISH Network Corp (NASDAQ:DISH), “DirecTV” by AT&T Inc. (NYSE:T), and “PlayStation Vue” by Sony Corp (ADR) (NYSE:SNE).
With the strength of Google, YouTube TV is likely to be a bigger success and push Alphabet’s business growth higher. This has tremendous potential to further lift Google stock. As posted on the YouTube blog on Monday, YouTube users around the world are now watching a billion hours of YouTube content every single day! This is a huge milestone that was achieved last year, and there does not seem to be any slowdown in this momentum.
The Wall Street Journal also reported on this achievement, stating that this was a 10-fold increase in viewership since 2012. Watching a billion hours of videos a day means that YouTube is fast emerging as one of the biggest threats to the U.S. television industry. This milestone has been made possible by Google’s extensive use of artificial intelligence (AI) to recommend videos to users. (Source: “YouTube Tops 1 Billion Hours of Video a Day, on Pace to Eclipse TV,” The Wall Street Journal, February 27, 2017.)
YouTube Chief Product Officer Neal Mohan stated that YouTube content continues to get richer and that machine-learning algorithms do a better job of exploring the content that an individual user likes.
This milestone brings out clearly the phenomenal lead that the platform has in online video. It is not clear how much money YouTube makes, however, and the company’s management is very clear about growth being the top priority, not the profits.
The following GOOG stock chart shows how this focus on growth instead of profits impacts the stock.
Alphabet Inc does not hesitate to invest heavily in technology and, with the launching of YouTube TV, the company would be spending big-time in acquiring the rights to content. At times, this creates concern among investors, which then negatively impacts Google stock. But, as I had written earlier, these big investments that Alphabet is making today should be beneficial in the long term. Moreover, the company will have a lot of tools at its disposal to monetize its user base.
The growth in the Internet ad industry is another factor that would be extremely positive for GOOG stock. Google and Facebook Inc (NASDAQ:FB) are the two technology giants that dominate the online ad industry. And, as the pie grows bigger, their share is likely to grow as well.
In January, the company had announced strong Q4 numbers, but the earnings took a hit on a one-time tax charge. Alphabet CFO Ruth Porat stated that the company’s growth in the fourth quarter was exceptional, however, and that this performance was led by YouTube and mobile search.
This signals that the journey has just begun for the online video platform, and YouTube TV is likely to bring some disruption to the streaming industry. With the company’s expertise in machine learning and heavy investments in technology, it would be interesting to watch the developments in this field. However, Google stock is likely to stay on top, given the competitive edge of Alphabet Inc.