Alphabet Inc Company Analysis - Paper Example

Alphabet Inc. is rated as the second most valuable company in the world, and mostly after companies obtain distinctive rates of growth they mostly face setbacks and most of all the risk to fall for instance the case for Apple Inc. whose revenue declined at a considerable rate in 2016 as the first occurrence since 2001. In the year 2012 GOOG stock rose by single digits where in the later year in 2013 the digits rose by approximately 60%. Then later in the year 2014 the stock prices rose by 3% and later in 2015 the stocks gained 44% more after the adoption of the name Alphabet. In the year 2016, Alphabet Inc. rose by 8% and the trend is expected to hold and perform in a fairly good aspect. Google have grown to approximately $600 billion worth of the company, however, the most attractive prospect is that Google has had a consistent rate of growth over the past few years.

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Alphabet Inc. is the parent company of Google as well as the other companies that were under the ownership of Google and is a leading company around the globe in the technological sector. Google gained their reputation through their aggressive push for the conventional thinking and its determined growth rates. In the year 2016, the company indicated an ambitious rate of growth and reflected a highly innovative year for Alphabet. Therefore in the current trading year, investors, as well as consumers, should show enough confidence in the companys stock prices and other new products that Alphabet shall bring into the market.

The Advantages of the GOOG Stock

Google can now be technically said to be under its corporate parent company Alphabet that is their holding company. The other companies that are owned by Google are now under Alphabet and broken down into separate segments referred to as other bets. The other segments may not have fully picked up yet but Google has been playing the major role of providing revenue for Alphabet at roughly 90% of the total revenue. Most of the revenue that Google gets comes from advertising and google has been engaging in other income-generating activities. The main source of Googles income is search adverts that have been the core driver for generating Googles income. Paid clicks that are the form of advertisements whereby the subscribers pay for each click on ads on search results by web visitors. These have grown tremendously over the recent years increasing 29% over 2014 while in 2015 they grew at 33%. YouTube falls under Google and has also been one major contributory factor as mobile traffic has expanded leading to more users.

The growth rate for Google has been an outstanding trend; after the company was restructured to Alphabet Inc. in the year 201, the Google Adverts has dominated as the largest segment of their business income. This source of income for the company has been sufficient and attractive since the overall growth in revenues in 2016 averaged at 19% with a projected 16% rate of growth for 2017. The continued rate of success gives confidence to the company and investors since they have had a dominant financial performance.

The valuation for the Google stock is not overvalued by any chance. Despite the companys strong performance, enticing history and the huge future projections, their stock has been allotted the appropriate value. Over the year 2016, the shares were trading at approximately 20 times the forward earnings that were on par with the forward price earnings approximately at 19 for typical stock in the NASDAQ 100 and the S&P 500. The prices are assumed to be at a fair valuation that reflects on being a golden opportunity for an investor to take.

Innovation is also a great bargain for Googles stock since the company has a fairly valued price on the stocks with numerous opportunities for future growth. The company has continued to amaze and come up with new innovations that are highly potential to trigger further growth. Google has shown constant innovative ideas and inputs into the companys portfolio such as the Smart Contact Lens that reads blood sugar levels as well as Google Fibre internet that provides high-speed internet access.

Google has also engaged in the non-search sector for its business expansion, they have launched a fully integrated hardware industry to indulge the market. They first launched a $649 smartphone called the Pixel that has detailed aspects of a Google Assistant that is the companys new Artificial Intelligence personal assistant. The phone has spectacular features that pose real competition to the products in the market. There are other hardware products that the company has launched the market aimed at improving their revenue margins and this is a positively impacting aspect to the stock. However, there are a few cons associated with the Alphabet stock just as any other stock would harbor positive and negative traits.

The Cons Associated with GOOG stock

Amazon stands to be a force to reckon with especially for the Googles AI personal assistant that faces direct and thorough competition from Amazons Echo and the Echo Dot goods. Amazon is taking advantage of Googles popular product to market their own via their highly renowned online marketing platform. It is approximated that 38% of searches done for online products start at Amazon while only 35% start from the search engine; this is according to a research conducted by PowerReviews survey. Back in 2013, a research that was conducted by Forrester survey indicated that 30% of the shoppers online start by looking for a product on Amazon while only 13% start searching for products on Google. Most of the expensive products keywords that are input on Google are mostly the hot leads for products since they mostly end up in sales. The reason for the growth in Amazons influence for online product search emanated from the Wall Street research company Wedbush that downgraded Alphabets stock by implying that the stock would underperform by allotting them $700 price range. The other factor that contributed to the popularity of Amazon over Google was the rise in the use of ad-blockers that blocked most of the Google ads thus reducing their popularity. However these factors are only the external negative influences on Googles stock, there are other internal aspects that have a negative influence on the same.

Googles engagement in the mobile industry is still a young investment that has not yet established a strong ground for take-off especially when it comes to the close mobile competitors such as Facebook. YouTube has not fully met the expectations that have been assigned to it, Facebook, on the other hand, has successfully engaged in videos and the Facebook Live option while other providers are engaging in the same types of provisions as google but only that they are doing it better since they are the prime social media platforms, for instance, Twitter has also recently engaged in live streaming as well as Instagram. The other setback for GOOG stock is that the other bets incorporated under their memo are not doing well either, in the year 2015, they managed to obtain a revenue of $448 million but also incurred a loss of $3.6 billion. GOOG may be willing to adopt a risk-taking the attitude of which it may spell positively or negatively for the company; however, the adoption of the hardware market engagement may be somehow oddly-timed. The recent announcement of the Daydream Virtual reality headset and Pixel Phone were launched in a manner of trying to close a gap that was already established but for fully different reasons; it came as a source of revenue for the company to make up for the cost the ad blockers and the compromise on popularity to Amazon instead of finding a direct means to cut on the setbacks of ad blockers and Amazons popularity. Googles adoption of hardware products is not entirely clear to the company and the investors as the previously similar venture on hardware; Lenovo and Motorola ended in a $9.6 billion loss.

However the most positive aspect that seems to curb all the setbacks is that Google has the global dominance that does not seem to wane anytime soon, they currently have control over 70% of the online global market. The GOOG stock is currently trading at approximately $800 upwards for the price-earnings ratio at 20 times. Therefore as a risk tolerant investor, the cons associated with GOOG stock are assumedly bearable and worth taking.

The Impact of the new Corporate Structure on the Stock Value

On December 24th, 2015 the Alphabet share was valued at $748 that saw the share to be the highest in value for the stocks marketplace. However, most of the investors had to wait and see how the restructuring of Google would result. Google has engaged in several business practices such as software development and other enterprises such as the Google Capital, Google Venture, Fiber and Calico. These aspects contributed to the rapid growth of the company but still acted as a minor setback in terms of investor accountability and legal liabilities that got tied directly to the main business of the search engine. After the incorporation with Alphabet, this places the different and the separate enterprises under a parent company whereby each of the enterprises can be managed independently and given a broader focus. This ensured that the core business of the search engine was liberated from the risk of association with the other bets adding to the guarantee of continued growth. From the respective changes that Alphabet incorporated, it is expected that the company will engage in thorough monetization of the independent services to a higher fervor in the coming future periods. A roof limitation of the stocks has also been eliminated from the stock value meaning that they can be assigned maximum value in regard to performance in the stock market.

Development of self-driving automobiles corporate

Research indicates that Alphabet has currently expanded into venturing the self-driving automobile business. Due to the use of an advanced technology, the company has managed to dispatch fifty-three test cars in San Francisco and Austin highways and have cumulatively recorded to an approximate of 1M miles of independent driving. At the beginning of 2016, Alphabet and Ford were projected to publicize their partnership in the construction of self-driving automobiles. This deal would enable Alphabet to observe and gain knowledge of Fords expertise in the production of cars and infrastructure while Ford, on the other hand, would benefit by gaining knowledge of the expertise used in software by Alphabet. Thus each company would not only accrue tremendous benefits from the partnership but also facilitate the saving of billions of dollars that would otherwise be used for the production of self-driven vehicles that meet the demand. The move made by both companies is seemingly huge considering that they are entering into a new business venture of automated car sharing, therefore, it stances as a threat to other existing ride-sharing companies in the marketplace such as Uber. Research indicates that due to this development most of the demands for quality and luxurious transportation will direct their preference towards the advanced science, and Alphabet seems to deliver the developing reality to customers.

Project Loon

By making the use of Project Loon, in 2016 the company was projecting to undergo major developments in enabling the provision of internet service to an approximate of 6 billion of individuals who currently do not have access to the internet. Therefore, Project Loon strategized on launching a number of super pressure balloons to a height of 12 miles high reaching the stratosphere of the Earth so as to transmit internet services to the antennae on earth. Each and every super pressure ball...