Like almost all American stocks, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) was under significant pressure due to the new coronavirus. However, significant declines like this current opportunity and with the GOOG stock still down 21% from its highs, this merits further examination.
This company has so many positive points. Although Google may suffer from short-term turbulence, investors should not forget some of its long-term qualities. At its bottom, GOOG stock fell 33.8% from its highs.
Who knows, maybe this opportunity will come up again. We don’t know if that’s the case, but we do know that Google is a long-term winner.
GOOG shares have a solid balance sheet
One of the most attractive qualities of Alphabet right from the start is its track record. It may not be the most exciting thing going on in the business, but in times of uncertainty it provides a huge level of security.
Think about it. Do you want to partner with companies on the brink? These companies may not have enough cash to cover their short-term expenses, especially with weakened cash flows. They may have to raise capital, which dilutes shareholders or increases stress on the balance sheet.
This is not the case with GOOG actions.
In the last quarter, Google had $ 119.7 billion in total cash on its balance sheet. This represents long-term debt of $ 3.9 billion. Current assets of $ 152.5 billion represent more than three times the current liabilities of $ 45.2 billion.
In short, Alphabet has one of the strongest balance sheets in public markets. It’s next to Facebook (NASDAQ:FB), Microsoft (NASDAQ:MSFT) and others. I don’t know about you, but when the world enters a period of maximum uncertainty, I want to bet on stocks with maximum certainty. In this case, “certainty” is money in the bank and Google has a lot of it.
Business is booming
Unlike the balance sheet, there are disadvantages to Alphabet companies with the advantages.
On the positive side, its platforms receive a ton of use because the public is trapped at home under orders of quarantine, locking and shelter on site. They broadcast videos on Netflix (NASDAQ:NFLX), Googling like crazy and watching videos on YouTube (another property of Google).
He’s the pro; everyone is online right now and Google is dominating the internet. The downside is that digital ad spending is going down. To some extent, the large increase in online traffic will help offset some of these losses, but it will not completely compensate for the decline in advertising revenue.
When businesses that advertise online are suddenly hit with a drop in cash flow, marketing budgets are hurt. That means they spend less on Google ads, YouTube ads, Facebook ads, and any other ad on any other platform. It’s like that.
But once the economy becomes operational again, those advertising dollars will come back and businesses will resume their growth for Google. As it stands, analysts still expect 11% revenue growth this year, so it’s not a year of complete contraction for Alphabet.
However, they expect profits to drop by around 1% in 2020 compared to 2019. After the recent stock rebound, GOOG stocks are trading at around 24 times earnings this year (and the profits from last year, really).
The future of GOOG action
Alphabet has a charged bank account and an internet income generator. But that won’t stop the company from advancing future technology. It leverages its Pixel smartphone, Android operating system, ChromeCast streaming options and home connectivity to drive growth. Perhaps the most promising of all is its autonomous division with Waymo.
At one point, Waymo was getting long-term valuations of up to $ 175 billion. While technological developments can sometimes be slow due to the incredible respect for security, this future technology will play a big role in transport and logistics.
This also leaves many questions for investors. Can someone catch up with Waymo in terms of competition? Should Google Consider Acquiring a Business – Maybe a Business Like Lyft (NASDAQ:LYFT) – as a platform for its service? How long does it take for autonomous driving to become the norm?
There are many questions in the future, but investors can sleep well at night knowing that the GOOG share will provide answers. The latest drop in share prices is just an opportunity along the way.
Matthew McCall left Wall Street to really help investors – bringing them into the world’s biggest and most revolutionary trends BEFORE anyone. The power to be “first” gave Matt’s readers the chance to earn + 2,438% in Stamps.com (STMP), + 1,523% in Ulta Beauty (ULTA) and + 1,044% in Tesla (TSLA) , to name a few. Click here to see what Matt has in his sleeve now. Matt is not directly the owner of the above titles.