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Google (GOOG) Stock | All Grown Up

|Includes: Alphabet Inc. (GOOG)

Google Inc. (NASDAQ: GOOG)

Google has officially made it through its infancy, past its life-defining teen years, and is now a full-fledged adult with all the problems that come with being a full-fledged adult. Where Google was new and exciting as a baby, rapidly changing and growing as a teen, it has now settled down and is facing mature questions like cost-saving, efficiency, and long-term risk.

GOOG's Strategy Change Announcement

Google's change in company life-stage and strategy was well documented in a Wall Street Journal article released Monday night. Google hired a new CFO with a reputation for reducing expenses in May, hinted at being more disciplined in spending and investing since December, and 2015 Q1 was the first time since 2013 that the number of new employees added has decreased two quarters in a row. The WSJ report with all the details fleshed out helped share prices surge so much that it even got noticed all the way down the line in some internet ETFs.

Google, Inc. Looking Heavier?

First, let's start with the heavier side. It is the heavier side because it is the negative side but also because it seems to have more weight at the moment. Some of it is simply because of the life-cycle of the company. Explosive revenue growth of 100, 200, or even 400% like Google experienced in the early 2000s cannot be expected to continue forever, especially as a company gets larger and more mature. Shareholders had to settle for 20% revenue growth in 2014. But some investors fear Google's very core business of is under attack from rivals like Facebook and Microsoft. They think Bing's new search engine deal with AOL and Facebook's new video ad program may be the beginning of an erosion of Google's stranglehold on search ads and video ads on YouTube. Shares continue to look less attractive when you consider that cost-per-click revenues have continued to decline, capital expenditures have soared to wild heights, and the company has no plan to return any capital to shareholders. Shares of Google are even somewhat ignored by institutional investors because the company "has developed a reputation for being the plaything of its founders rather than a profit-maximizing business." And maybe it is or maybe it isn't a harbinger of things to come, but Facebook just smashed one of Google's growth records.

But They're Trying to Lose Weight

Google has now publicly admitted that they will try not to appear so heavy going forward though. The new CFO Ruth Porat has a strong reputation on Wall Street (as the former CFO at Morgan Stanley) and has perked investor interest already. She and CEO Larry Page know that helping the stock price keep pace with other Silicon Valley tech giants is an important part of attracting top talent from rivals and funding the work they are striving to do (even if that work is all just the plaything of its founders). Some analysts believe that revenue growth from YouTube and Google Play will continue to grow and propel the company into the mobile age. And in the even more immediate future, other analysts believe shares will continue higher when quarterly results are released on Thursday because of strong growth across its core businesses.

Technical Analysis

GOOGL received a modest price target raise from Credit Suisse last week and a reiteration of their "Outperform" rating. Analysts at Pivotal Research downgraded GOOGL on Tuesday to a "Hold" rating. In total, GOOGL currently has seventeen "Buy" ratings and nine "Hold" ratings.

Company Profile

Google Inc is a Silicon Valley-based company focused on internet and technology products and services. It started as a search engine at google.com, which quickly became the most-visited site on the internet. Through ad-selling revenue related to internet searches, Google has grown into the world's fourth most valuable publicly-traded corporation by market capitalization.

Orignally posted on Warrior Trading News