Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) stock has made a solid recovery so far this year. Other tech stocks have performed even better during this time frame.
Still, a nearly 43% jump in price for GOOG stock is nothing to sneeze at.
However, chances are it’s not the stock’s performance relative to other FAANG components that has you wondering whether now is the time to sell/avoid the Google and YouTube parent.
Instead, the fact shares have topped out may fuel a rise in fear, uncertainty and doubt.
But while this mega cap tech stock has encountered some resistance, there’s no need to jump to the conclusion that now is the time to take profit, or to stay away completely.
Instead of delivering trading sideways (or worse, moving lower) from here, a move to higher prices may be in store. Here’s how.
What Could Drive the Next Move Higher
A big reason why Alphabet shares have not boomed as strongly as other big tech names has to do with the perception that the company is not as exposed to the generative artificial intelligence (or generative AI) trend as several of its competitors.
Conversely though, this may explain why GOOG stock today is treading water, while big tech names with (perceived) greater exposure to AI trends have pulled back lately. However, not only are shares perhaps less at risk of declining as “AI mania” calms down.
This stock may in fact have the ability to move higher, as the company assuages past concerns that AI progress from rivals threatens Alphabet’s cash-cow Google Search unit. Over the past month, several developments have helped to calm down these worries.
For instance, in last month’s quarterly earnings release/investor update, Alphabet reiterated that it has accelerated its AI efforts, with the reorganization of its AI research and development unit.
According to tech publication The Information, this newly-combined team is working to launch a new AI foundation model, Gemini, this fall. This launch may enable the company to finally shake off its “AI also-ran” reputation.
Another Possible Booster for Shares
It’s not set in stone that Gemini will help to finalize the perception shift about Alphabet’s edge in the area of AI. For all we know, the market could respond to the Gemini launch in the same negative way it reacted to the launch of AI chatbot Bard last February.
Still, I wouldn’t assume that Gemini will be Bard 2.0, which as you may recall resulted in a big dip for GOOG stock.
Alphabet has likely learned from its last AI mistake. By being less hasty, the company could end up having a successful launch. This in turn could bolster confidence in Alphabet’s overall AI strategy.
That’s not all. Besides the potential for the stock to have an AI catalyst, there’s another factor that could serve as a possible booster for GOOG. That would be the company’s continued efforts to cut costs.
According to Barron’s, after cutting 12,000 jobs earlier this year, CFO Ruth Porat has her sights on Alphabet’s “Other Bets” unit.
Other tech giants have cut back on their “moonshot” type wagers. If Alphabet does the same, the company may just well be able to deliver higher-than-expected earnings in the coming quarters.
Bottom Line: Buy on Any Near-Term Weakness
Since January, the company’s shares made a partial recovery, even as Wall Street still holds a “show me” stance about Alphabet’s AI endeavors.
Numerous factors have driven this. Besides improved sector sentiment, a major company-specific has been improved demand for digital advertising. Both have been key in the stock’s return to the $125 per share price level.
Following this, the next big price level for GOOG to re-hit is $150 per share (near its all-time high).
The stock has a strong chance of making such a move. Besides the catalysts listed above, other developments, such as continued profitability growth for Alphabet’s Google Cloud segment, may help to drive the next big rally for shares down the road.
With this, if GOOG stock experiences any weakness, consider starting to build a position.
GOOG stock earns a B rating in Portfolio Grader.
— Louis Navellier and the Investor Place Research Staff
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Source: Investor Place