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Are We Hitting Peak Google?

|About:Alphabet Inc. (GOOG)

No one sees a tech stock's peak before it happens.

No one saw Microsoft (NASDAQ:MSFT) losing its battle with the U.S. Justice Department so decisively. No one saw Apple's (NASDAQ:AAPL) deep dive last year. No one, except those who did.

Well, it now appears we're hitting peak Google (NASDAQ:GOOG).

To this must be added the growing balkanization of the Web and the rise of "national" search engines like Yandex in Russia and Baidu in China, the increased pushback in Europe on privacy and other issues, and the firm's continued trouble with patents, where it recently lose decisions to both Microsoft and Apple .

It's not definitive, but the cracks coming before the fall never are, until after the fall comes.

In order to justify its P/E of nearly 28, Google needs to maintain its 25% top-line growth rate, and grow the bottom line by at least 10% this year. That would mean gross revenue of $62 billion this year with profits near $12 billion - so far it's on $28 billion in revenue and net of $6.5 billion. The assumption is that the second half of the year, especially the fourth quarter, will deliver the goods, but eventually the law of large numbers catches up with everyone.

What does Google have right now that will move the needle, a lot, in a positive direction? Just as Microsoft remains a Windows-driven company, and Apple remains a device-driven company, Google remains, essentially an ads-driven company. Increased sales of devices through its Motorola unit don't deliver the bottom-line results of its ad sales, and their profitability on all fronts pales in comparison with Apple.

Plus the natives are getting restless. Samsung continues experimenting with non-Android operating systems like Tizen. Amazon says its devices are based on Android, but Google is making nearly nothing from them, either before or after the sale. And then there's the anti-trust issue, where it still hasn't settled with the European Union over last year's charges and is practically daring the U.S. to open another case against it.

It all smells like drift. Is it time to take some Google dollars off the table?

Disclosure: I am long GOOG, AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Stocks: GOOG