Google Stock: This Is Why Alphabet Inc Is a Top Pick for 2016
If you are using the Internet, you know that Google is not just an option—it’s a necessity. So it should come as no surprise that Alphabet Inc (NASDAQ:GOOG) stock is having a giant bull run. The neat thing is that the climb might not be over just yet. There are a few catalysts that could send Google stock a lot higher in 2016.
Google’s Core Search Going Strong
While Google’s new name, Alphabet, seems to be less associated with the company’s search engine, it cannot be denied that search is still the bread and butter of Google’s business. And that’s not really a bad thing.
In the search engine game, Google is the undisputed king. Since its introduction back in 1997, Google search has defeated every opponent that came in its way.
According to the latest comScore report, “Google Sites” captured a massive 63.8% of the U.S. core search market in January 2016. “Microsoft Sites” came in a distant second with 12.4% share, while “Yahoo! Sites” had 12.4%. (Source: “comScore Releases January 2016 U.S. Desktop Search Engine Rankings,” comScore, February 15, 2016.)
The neat thing about the search engine business is that there’s something called the “network effect.” To put it simply, the more people using the product or service, the better it becomes.
For search engines, the one with the largest market share can provide the deepest and most contextualized search results. That’s why, as a market leader, Google’s future success in this segment is almost guaranteed. Moreover, this means the momentum in its advertising business could very well continue.
Google’s most recent earnings report suggested that despite being the market leader, the company can still outgrow its competitors. In the fourth quarter of 2015, Google’s advertising revenue increased 17% year-over-year to $19.08 billion. (Source: “Alphabet Announces Fourth Quarter and Fiscal Year 2015 Results,” Alphabet Inc, February 1, 2016.)
Let’s admit that moonshot projects are always costly. And it’s no exception at Google. But you know what? Investors love moonshot projects, because if some of them turn out to be successful, the company could be making the next big thing.
For instance, Google is working on self-driving cars. In fact, the company is moving much faster than some of the other tech giants in this business. Its driverless cars have been roaming the streets of San Francisco for some time now.
Moreover, Google is building the groundwork for fiber Internet, meaning it could be competing against industry giants like Comcast Corporation (NASDAQ:CMCSA) and AT&T Inc. (NYSE:T). “Google Fiber” delivers Internet speeds of up to one gigabit per second. The service is already available in four metropolitan areas and could be expanding to seven more, including San Francisco. (Source: “Expansion Plans,” Google Fiber, last accessed March 1, 2016.)
The Bottom Line on GOOG Stock
Investors like companies with a wide economic moat. For Google, that moat comes from its core search business. Moreover, the company is working on quite a few moonshot projects that could become huge catalysts for Google stock in the future.
It’s safe to say that the outlook for Google stock is as bright as ever.