Google’s stock has had a great multi-year run all the way up over $1,200 per share before the split. But starting in March, the stock price started a serious trek downward just like many other Internet companies. While Google’s share price has faired better than some of the other highly recognizable names, the stock is still down a significant 15% from its highs.
Google was supposed to be the company that was firing on all cylinders. Its dominant position in search allowed them to bring in obscene amounts of advertising dollars that fueled all their other exciting pet projects. Google was seen as the innovator while Apple was declared dead in the water with no new product releases and nothing but continued secrecy on the horizon. Google could do no wrong while Apple could do nothing right for almost a two year time span.
Something has obviously changed as Apple is now the strong stock and reaching new 52 week highs while Google struggles everyday to keep in positive territory. I think it is safe to say that there is a fair amount of money being pulled out of Google to go into Apple stock.
What changed is two things:
1) Google search dominance on desk tops and laptops means little in a world that is increasingly going mobile. They have yet to prove that they can meaningfully monetize mobile traffic and have it bring in the same big numbers as the traditional desktop traffic did.
2) Google’s side projects, while innovative and possibly useful in future years, have failed to make any money and investors are now questioning whether they will amount to anything.
The last Google earnings report saw ad prices falling on mobile devices which could be a huge problem in the future. Investors were not happy with that report even though overall growth was good. In this high growth game, Internet companies need to come out with earnings that dazzle every quarter and there just wasn’t enough of that this time around. So the stock dropped.
Add on to that the fact that Google Glass is not popular at all, driverless cars are still a far off dream, and all the other projects Google has been working on are still somewhere in development or in a lab somewhere. Investors have been giving credit for Google’s “vision” but there comes a time when some concrete results need to be seen. I think Google Glass especially, has failed to excite anyone and it may in the end be a niche product for certain professions instead of a device that the general public buys and loves. I know I will never put a Google Glass in front of my eyes!
The Future Of Google Stock
Google is still one of the more stable Internet companies and there is no denying that. However, the days where investors just give a free pass and drive up stock prices without proof may be ending. As mentioned, Google has faired better in this tech sell off than many other companies and that attests to its solid search income that is hard to compete against.
But Facebook seems to have mobile advertising dollars figured out and they are a worthy competitor in that arena. Google needs to get its act together quickly as more and more people only use their smart phones and tablets to connect to the Internet. As we all know, the Internet and people’s habits change very rapidly and while dominant today, that is not a guarantee that they will adapt and be able to make as much money as the industry changes.
Google stock might not be the same growth stock it once was and I think investors are starting to figure that out. So if you do decide to buy shares, be careful of your expectation and keep close watch of what Google does in the coming quarters to get back that growth that they appear to be losing.