Some of the best growth opportunities, particularly in the technology sector, can be found when companies use their existing asset base to enter completely new markets. When they do so, they take on incumbents in the market they are entering by surprise, and often leave the incumbent unable to defend. Apple's (AAPL) entrance into the mobile phone market from the PC/mobile music environment where it was able to defeat incumbents like Research in Motion (RIMM) and Nokia (NOK), Google's (GOOG) entrance into word processing and business applications from its start as a search engine where it was able to attack Microsoft (MSFT), and Amazon's (AMZN) move from a high traffic web site to a web server company where it can take on Rackspace (RAX) and server-intensive media companies like Netflix (NFLX) are prime examples. If you can see this happening before the trend actually occurs, it's a great opportunity. The ascension of Apple's stock price over the past 10 years, in which it has repeatedly entered new markets, is a prime example (though myself and others regard it as a bubble at this point).
It is from this perspective that I'm especially interested in Google's acquisition of TxVia, a player in the payments processing space boasting relationships with all the major payment networks as well as prepaid, reloadable, and gift cards. Google Wallet is one of the most promising ventures the company is working on, as I believe it ultimately positions the company to disrupt the banking industry (see my previous coverage of Google Wallet). Google Wallet has the potential to combine loyalty programs from Google Offers; integrated with Google's identity and social network service, Google+; and its Google's mobile operating system, Android. Now with the TxVia acquisition, the Wallet team is stronger -- perhaps especially important in light of the recent mistakes Google has made with its prepaid virtual cards, which led Google to apologize and give $5 to all afflicted Wallet users -- and the possibility of integrating all of this with real-world prepaid debit cards becomes much more viable. In my opinion this is especially important, because while the "pay with your phone" approach utilized thus far by Google Wallet requires a change in user behavior, however slight, utilization of prepaid debit cards and gift cards does not. All of this brings us one step closer to Google issuing its own currency. A Google dollar, perhaps partially backed by gold? It sounds crazy today, but that's the direction we're headed in -- and it's a direction that opens up a whole new market for Google.
While Google's efforts with Google Wallet is the most important opportunity the firm is pursuing, there is one other opportunity that could also open up a new market and thus I think is worth briefly mentioning here. That is Google's endeavors in the energy markets. Google has spent nearly $1 billion on energy, but it has mostly been solar and wind energy. Google is a major consumer of energy, so it has a real interest in pushing energy prices down so as to push its overall costs down. But I believe it should be focused on nuclear energy rather than solar and wind. Nuclear is simply the most cost-effective, scalable form of emission-free energy out there; it is what the world will need to transition to as peak oil becomes more apparent.(My previous article on the transition from oil to nuclear elaborates on this.) So their focus on solar and wind is not what I regard as a prudent investment.
All things considered, my opinion of Google is fairly unchanged at this time. I think the stock is appropriately valued, and thus not particularly worth buying or shorting. I do believe the market as a whole will rise, and that Google will keep up with inflationary trends accordingly. If Google continues to make important progress with Google Wallet, specifically with the introduction of its own currency and more signs of an attack on the banking industry, I think it will be an outstanding opportunity, and I think it would enable the firm to capture much of the market share currently going to banking industry titans like Citigroup (C), JP Morgan (JPM), and Bank of America (BAC). At this point, though, I would prefer to see more signs of this occurring before entering a position accordingly. Alternatively, if Google can fall to $450, a move I consider unlikely from here but of course possible in some type of a dramatic sell-off, I would be in favor of accumulating. Put another way, I think if there is a repeat of 2008 and there is a big market crash, Google will be one of the names most worth buying.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.