Despite a very strong rally in the share price of Alphabet Inc. (NASDAQ:GOOG), the parent company of Google, in recent months, I still see a significant amount of upside on the horizon for the online advertising giant. There are a number of key catalysts that I see taking this stock higher in the near term; these drivers are also likely to continue to propel shares higher over the long term.
Alphabet’s valuation is reasonable, given its growth potential right now. With a price to earnings ratio hovering around 33, investors are implying decent growth. I, however, think growth over the long term could be substantially higher than what is implied by the company’s current valuation. This growth is likely to materialize due to a shift to online sales for all industries, a trend that has only accelerated as a result of the coronavirus pandemic.
One key catalyst is as follows. Companies everywhere are scrambling to improve online platforms and online stores in a bid to take away market share in a sector with a ton of growth potential.
Advertising online is likely going to displace and reduce the more traditional forms of advertising spending which has dominated for decades (think television and radio). With more consumers moving online, spending far more time on social media sites than watching traditional cable, corporate spending patterns on advertising continue to lag reality. When spending picks up and aligns with where the eyeballs currently are, Alphabet will be the key place corporations go to get their goods out there to the online shopper.
Invest wisely, my friends.
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