Another stock that has been puzzled lately has to be Alphabet Inc. (NASDAQ:GOOGL), parent company of Google. Alphabet is considered one of the highest-quality companies in the world, with one of the largest market capitalizations in the U.S. The company has an incredible trajectory of long-term growth based on a secular growth trend. This has somehow lasted for decades, with seemingly no end to an incredible runway of growth.
Alphabet’s stock price has been beaten up, though not to the same degree, or even close, as the broader market. This makes this stock, both enticing and puzzling at the same time. On the one hand, advertising revenue, which comprises the vast majority of Alphabet’s top and bottom line performance, certainly tends to get cut back in times like these. Companies are beginning to slow their spend, particularly in what businesses tend to classify as non-essential services. Advertising revenue always declines as a percentage of GDP in recessionary environments as companies hoard cash to stay alive and avoid ad spending.
On the other hand, online advertising has never been as integrated into the aggregate economy before. With companies largely forced into closing their physical doors but opening up virtual ones, there’s an interesting counter-cyclical argument for Alphabet’s business model that things may indeed not be as bad as many think, at least yet.
As with most companies, the question of how long this pain will last is what most investors are focused on right now. However, given the long-term stability and upside Alphabet offers, now may be a good time for long-term investors who do not care about the short-term to jump in.
Invest wisely my friends.