Alphabet Inc, the parent company of Google, has seen its shares rise about 20% so far this year. Despite this impressive clip, Google stock has even more room to grow on the back of several growth catalysts we will discuss in this article.
YouTube is the biggest growth catalyst for Alphabet. As of the end of the second quarter, there are over 1.5 million monthly active users who spend on average 60 minutes daily on YouTube. According to a detailed report published by Cisco, by the end of 2020, over 75% of the mobile traffic will be coming to the video content on the internet, compared to 55% recorded in 2015. This is a promising opportunity for YouTube, as it is the biggest video platform on the internet. Facebook is rising quickly to become a tough competitor of YouTube in video but analysts don’t think that the social media platform will be able to reach the scale of YouTube for several years to come. A billion hours of video are watched on YouTube daily, compared to 100 million video hours watched per day on Facebook.
Alphabet is also working to reinvigorate its smartphone segment with a revival of Android One smartphones. Most Android phones in the world don’t run the stock version of Android. Alphabet is reportedly looking to buy HTC. The company also signed a partnership with Xiaomi. Google will put its Android One OS in $235 Xiaomi Mi A1 phone, which is a clone of iPhone 7 hardware. This will help Alphabet increase its smartphone and Android revenues, and cause problems for Apple, which is unable to put a cap on its iPhone prices. The latter company is likely to face a decline in sales in the coming quarters.
Although it hasn’t hindered the rise of Google stock, investors are concerned that the massive fine of $2.7 billion slapped on them by the European Commission might dent the company’s balance sheet. However, Google has announced that it will appeal against the decision. Analysts think that there is a strong chance that Google will get a big concession. Microsoft managed to avoid a big fine back in 2001 amid several appeals and negotiations with the European authorities.
As to long term growth prospects, Alphabet Inc is stronger than any other company. Alphabet’s grasp in the AI business is increasing exponentially. The company recently acquired India-based machine learning and AI startup Halli Labs. Alphabet is also betting big on futuristic technologies with Google Fiber, Calico (a project to increase human lifespan), Verily (healthcare project for glucose-sensing contact lenses), Nest (smart home), and X (driverless cars). These acquisitions add diversity and make Google stock a strong prospect for continued growth.