As Alphabet (NASDAQ:GOOG;NASDAQ:GOOGL) once again hits a new all-time high, is it time to take profit with Alphabet stock? Not so fast! Yes, since the spring, shares in the Google and YouTube parent have experienced an incredible run-up in price.
Recent macro developments suggest that another round of turbulence on Wall Street may be just around the corner. If this occurs, you can expect this “Mag 7″ component to reverse course alongside the broad market.
Yet if you have a long time horizon, a sell-off or correction is nothing to fear. It’s not as if GOOG, after its recent operational and price performance success, is about to embark on an extended period of poor performance.
Why? Chalk it up to not one, not two, but a myriad potential catalysts. All or some of them leave shares poised to continue delivering strong returns.
GOOG Stock: Key Concerns as Shares Hit New Highs
GOOG may have stumbled at the start of the year, but in recent months, and especially after Alphabet’s latest quarterly earnings release in late April, shares have surged, as investors become increasingly bullish. The reasons for this are twofold.
First, Alphabet is successfully integrating generative artificial intelligence technology into its various platforms. Second, Alphabet’s flagship Google Search unit faces little threat from competitors. Still, while the overall market remains bullish on GOOG stock, it’s understandable if you think that sentiment could shift back to bearish in a big way.
Even if stocks stay strong following the latest developments regarding inflation and interest rates, admittedly there are quite a few direct factors that potentially could negatively weigh on GOOG’s price performance.
For instance, further news about ChatGPT developer OpenAI’s plans to launch an AI-powered search engine could call into question current confidence that Google will maintain its search dominance.
News related to regulatory scrutiny, whether in the U.S. or internationally, could once again weigh on shares.
Other positives in Alphabet’s earnings release wound up outweighing concerns about increased AI spending, but such concerns could weigh more heavily in the eyes of the market, when the company reports Q2 2024 results next month.
More Catalysts Than You Can Shake a Stick at
Make no mistake. If any of the aforementioned potential risks play out, they could lead to poor returns for Alphabet stock going forward. Given that GOOG is not as pricey as other “Mag 7″ stocks, downside risk may not be high, yet if confidence that the company’s growth slows back down will undoubtedly lead to poor returns for shares.
That said, don’t worry too much about these risks. Why? GOOG continues to have more catalysts than you can shake a stick at. Gen AI of course remains a significant growth catalyst in Alphabet’s corner.
The rollout of Google’s Gemini AI platform is only in the early stages. The company is also making progress integrating generative AI technology into its Android mobile software program.
AI integration stands to further boost the appeal of Google Cloud to enterprise end users. As Alphabet integrates and monetizes AI in ways beyond those that benefit its digital advertising business, investors could become even more willing to give GOOG a higher valuation, as diversifying its revenue streams mitigates the impact of ad market cyclicality.
Besides technological catalysts, there are also a slew of potential catalysts that have to do with financial-driven efforts by the company’s C-suite.
Bottom Line: Still a Stock for All Seasons, and for All Portfolios
Recently, there’s been considerable talk about Alphabet’s incoming CFO, Anat Ashkenazi. A CFO change may not sound like a major catalyst, but as Seeking Alpha contributor Yuval Rotem has pointed out, Ashkenazi could do wonders to maximize GOOG’s fiscal and stock price performance.
Don’t get me wrong. I wouldn’t buy GOOG on the expectation that it keeps on rising by mid double-digits each year, as shares have performed over the past twelve months. However, with a myriad catalysts that could help the company sustain earnings growth in the 10-15% range.
As such growth could, in turn, lead to similarly-sized total returns for shares, Alphabet stock is anything but a “take the money and run” situation right now. It has, and will continue to be, a stock for all seasons, and for all portfolios.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
