In the mega cap technology space, Alphabet Inc. (NASDAQ:GOOG) has continued to be a top pick of mine for some time. With the company’s revenue and earnings actually positively impacted by the coronavirus pandemic, shares of one of the largest companies in the world by market capitalization have actually climbed to new all-time highs of late. Various catalysts have maintained their strength through this pandemic. In this article, I’m going to highlight one specific catalyst I see as stronger than ever right now that could take this stock even higher in the near to medium-term.
Online advertising spending happens to be a significant driver for Google’s core business. Online advertising makes up approximately 80% of the company’s overall revenue, so investors tend to keep a keen eye on how aggregate online ad spending changes over time. When the pandemic first hit, expectations were that weak macroeconomic factors would lead to a marked reduction in online advertising spending by corporations, but this has not materialized. In fact, companies have focused more than ever on their online offerings, boosting the top and bottom lines of Alphabet’s core business significantly.
Projections for 2021 are an aggregate increase in online advertising spending of roughly 20%, with an average growth rate in the 14% range for the next four years. This sort of growth ought to propel Alphabet’s stock price higher, representing an above-average growth rate relative to many of its peers who hold valuations significantly higher than that of Alphabet.
Invest wisely, my friends.
