Shares of Alphabet Inc. GOOGL, also known by its former name Google, are down nearly 14% in the past month, most likely due to mixed Q1 2019 earnings. Weak revenue posted in the first quarter of the year have had investors hesitant to buy shares of the tech conglomerate. These shaky first quarter earnings had people turning to Amazon’s AMZN unprecedented growth to blame for the sluggish quarter.
To go along with weaker-than-expected first quarter performance, investors have also had mixed feelings about the company’s intentions to diversify their revenue streams. Google X, a high-tech lab that focuses on conducting innovative experiments is one of the attempts the company has made to diversify. They have also invested capital into the development of driverless cars, artificial intelligence, and biotech. The company has made it no secret of their goal to be unconventional and their willingness to dive into new ventures.
CEO Larry Page has said in the past “short-term earnings wouldn’t always be the focus because the potential for future innovation was just too exciting” further establishing their position on diversification. During times of poor performance, this mindset does not provide assurance for shareholders.
Despite experiencing setbacks at the start of the year, Alphabet still remains a powerhouse. It has stood the test of time and survived severe economic climates that other companies fell bankrupt to. During the Great Recession of 2007-2008, the company suffered a 65% loss. However, once the economy began to show signs of life, the company was able to recover its losses in 3 years.
This crisis allowed Alphabet to showcase its durability in times of recession and panic. The company is no stranger to setbacks and has a track record that gives testament to its resilience. Alphabet’s history should provide investors with assurance about its longevity. The company remains a strong investment for those who wish to invest for the long-term.
Investors also have Alphabet’s moat, or competitive advantage, to fall back on. The company holds a substantial competitive advantage over the internet, becoming synonymous with searching the internet. Other companies such as Coca-Cola KO are examples of those who have moat in their respective field.
The tech giant’s main revenue stream stems from the searches made on their engine. Over 3.5 billion searches are made on the Google platform daily and is what makes the company a secure investment. These strengths are what earns GOOGL a Zacks Rank #3 (Hold). They also both share similar Zacks Style Scores of B in Growth and A in Momentum. The company has proved it is here to stay and its intentions to diversify their revenue streams and their inclination towards innovation can appeal to investors looking for a secure long-term investment.
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