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Despite its size, Alphabet is getting slapped around a bit this quarter along with the rest of the digital advertising space. However, GOOG stock may still be a good choice.
Even though “just Google it” became a sentence recognized by anyone who doesn’t know where to find certain information, it’s mother company Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) is recently being slammed. When it comes to marketing, it is pretty much visible that companies aren’t spending money on ads due to COVID-19 outbreak because they, either don’t have money, either they are shut down.
At the time of writing, Google (GOOG) stock was down by 1.30% to $1,259.72 because the company said it is planning to cut its marketing budgets by up to 50%, adding the cuts would be made in the second half of 2020. However, Alphabet decided to take some steps in order to mitigate this problem right before the company announces its quarterly earnings on April 28.
So, let’s have a look at how the stock is holding on.
GOOG and GOOGL Stocks of Alphabet Are Not the Same Things
Alphabet stock actually trades in two share classes. GOOGL presents Alphabet’s Class A shares meaning something that is ordinarily known as common stock. Holding one share of GOOGL gives you one vote at Alphabet’s shareholder meeting.
The other share class, GOOG stock falls under the Class C share classification. You don’t have any voting rights when holding GOOG shares of Alphabet. However, you can trade with it.
But, we will talk today about Class C GOOG shares that are more well-known. GOOG stock has been somewhat of a star on the Wall Street market, one of the most famous FANG stocks that represents the biggest technology firms in the U.S meaning Facebook, Amazon.com Inc (NASDAQ: AMZN), Netflix Inc (NASDAQ: NFLX) and Google.
The stock rose more than 115% during the last five years and actually hit all-time highs this March when they reached $1,500 before the coronavirus outbreak. Year-to-date, GOOG did lose 9%, which is still better than the S&P 500’s loss of 15.3%.
The company has a market capitalization of $834 billion with quarter revenue growth of 17.3% on a year-over-year basis. It also has approximately $120 billion in cash and less than $16 billion in debt.
Alphabet to Acquire Lyft?
Most analysts think that this temporary decline damage the stock. Also, the company has enough cash to absorb a smaller company it always wanted to acquire as is for example company Lyft Inc (NASDAQ: LYFT).
Also, let us not forget that Google was the biggest seller of digital advertising in the world last year, grabbing 31.1% of global ad spending to top Facebook Inc (NASDAQ: FB) and China’s Alibaba Group (NYSE: BABA).
However, when it comes to advertising, Google took a slap. The travel industry accounts for 10% of Google’s ad revenue or 10.7 billion in 2019, and that industry alone is projected to cut $3 billion in ads in Q2.
Also, there are restaurants and other companies in the same sector, and immediately some analysts say GOOG is going to suffer at least in the first half of the year.
Solving the Problem
But Alphabet is trying to do everything to solve this problem as well.
Let us not forget that the company has a long-term policy that it will not going to sell advertising about events that are considered sensitive and the coronavirus did kill more than 175,000 people around the world.
However, Alphabet has decided to allow some advertisers, including politicians, to run COVID-19 ads on Google platforms, which include its search engine and YouTube.