2020 has been dragging on for what feels like years, and just when COVID-19 infections seem to be settling down, cases begin to rise again. Not only that, but the World Health Organization has recently warned that the pandemic is speeding up as countries ease lockdown rules and that ‘the worst is yet to come’.
Grim words for grim times.
But enough of that, we’re here to talk about another beast altogether, the U.S. stock market. Despite record unemployment levels, a crumbing economy, and civil unrest, the stock market has continued to rise. Having fallen from their mid-March lows, the Dow Jones (NYSEARCA: DIA), S&P 500 (NYSEARCA: VOO), and Nasdaq Composite (NYSEARCA: QQQ) have risen 37%, 36%, and 43% respectively.
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The tech-heavy Nasdaq has been soaring ahead of its counterparts though thanks mostly to the growth of popular stocks such as Tesla (NASDAQ: TSLA) and Zoom (NASDAQ: ZM), while the FAANG stocks: Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Netflix (NASDAQ: NFLX), and Google (NASDAQ: GOOG) have been killing it — you could also include Microsoft (NASDAQ: MSFT) in this list to be fair.
But in all of these billion-dollar — or trillion-dollar companies — one of them sticks out as a ‘bargain’ of sorts: Alphabet.
Alphabet’s money-making machine
Surprisingly, of all the Big Tech stocks mentioned above, Alphabet — Google’s parent company — appears to be lagging behind. With Apple, Amazon, and Microsoft all riding high in the trillion-dollar club, Google is simply knocking at the door with nobody willing to answer, with a market cap of roughly $950 billion.
It might also be feeling a bit left out of the Big Tech hype of late:
- Apple’s releasing a slew of new software.
- Facebook is in the midst of an advertising boycott.
- Amazon is swiftly taking over the world as the dominant e-commerce force.
- Netflix is everyone’s go-to in lockdown.
- And finally, even Microsoft Teams is crushing it with its at-home work clientele.
It’s almost as if investors have forgotten about Google amidst all the madness, but never forget, that this is a money-making machine. Even when it feared a slowdown due to the coronavirus, Google still soared according to its Q1 earnings report. Earnings came in at an impressive $9.87 per share on revenue of $41.16 billion with cloud revenue jumping to $2.78 billion and YouTube revenue grew 33% to $4.04 billion.
CEO Sundar Pichai said that usage of search, YouTube, and other apps and services was significantly higher as people looked for information on the coronavirus pandemic. Even in the midst of a pandemic, Google is keeping on top of things.
What about advertising?
There is one issue of the current war on advertising as companies begin boycotting social media advertising. Google, which accounted for 31.6% of all digital ad spend in the U.S. in 2019, is probably quite worried about this trend.
Recent reports have proposed that Google’s ad revenue could drop as much as 5.3% in 2020 already, due to a cut in spending thanks to COVID-19 damage. Companies like Booking.com (NASDAQ: BKNG), TripAdvisor (NASDAQ: TRIP) and Expedia (NASDAQ: EXPE) have traditionally spent heavily on Google Search ads in the past, however, the industry has been upended in the past few months, and the recent surge in cases among states that have reopened does not bode well for those which make up some of Google’s best customers.
However, we will have to wait and see just how bad the effects on spending will be, but it will not be make-or-break for Google. The company controls 90% of the world’s search engine market share, an incredible feat that has made it one of the most recognized brands on the planet and allowed it to pivot into e-commerce, cloud computing, autonomous vehicles, and so much more. This monopoly also makes it invaluable to customers who need their advertising platform.
So, why Alphabet and not the rest?
Simply put, Alphabet might be the best ‘bargain’ of all the stable Big Tech stocks. With the coronavirus affecting its revenue stream, the company has shown it can adapt and rely on other growing revenue streams. While the likes of Amazon and Apple may seem more appealing right now, to me, Google has got a bit more upside potential in the short-term and is just as strong investment in the long-term. If I could invest $1,000 in just one of the Big Tech companies right now, it would be Google.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.
Editor at MyWallSt
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.