Last Thursday, the total market capitalization of Google's parent company Alphabet (NASDAQ: GOOGL) jumped over the $1 trillion mark for the first time. Alphabet is the fourth technology company to pass over this valuation, and joined the likes of Apple (NASDAQ: AAPL), who is valued at $1.38 trillion, and Microsoft (NASDAQ: MSFT), valued at $1.27 trillion, by maintaining their valuation over this level. Amazon (NASDAQ: AMZN) had passed over this level of valuation in the past, but has failed to remain above the threshold.
Alphabet's new valuation was fueled by strong expectations for its advertising sales by market analysts, the company's series of past acquisitions, and the tech firm's expansion into markets like cloud computing and self-driving cars. According to Alphabet's Q3 report, 84% of the company's total revenue came from Google's advertising, which has been leading a consistent growth of 20% over the past decade. Alphabet's cloud business has also doubled its revenue for its cloud business from $1 billion to $2 billion, and expects similar growth in the future. The company owns various subsidiaries including Calico, DeepMind, GV, CapitalG X, Google Fiber, Jigsaw, Makani, Sidewalk Labs, Verily, Waymo, Wing and Loon.
New Challenges Ahead
Alphabet has gone through major changes recently, with founders Larry Page and Sergey Brin stepping down from their positions in December, although both will remain controlling shareholders over the company. Google CEO Sundar Pichai assumed their place, making him CEO over both Alphabet and subsidiary Google. As CEO of Google, Pichai has oversaw all of the company's core business like search, advertising, YouTube and Android, which is where the company generates most of its revenue and profits.
In addition to a recent change of command, the company has suffered allegations of sexual misconduct by executives and a prompted 20,000 person employee walkout based on the manner. Alphabet's board of directs have been investigating the manner and the company has confirmed that its board has formed a committee "to consider claims made by shareholders in various lawsuits relating to past workplace conduct." Though the outcomes are still developing, it is unclear how this legal manner will affect the future of the company.
Alphabet has also recently come under antitrust probes from 50 attorneys general investigating Google since September 2019. Texas Attorney General Ken Paxton, who is leading the probe, announced the investigation as the legal authorities started to investigate the company's dominance in the ad market and the use of consumer data. In November, those investigating prepared to expand their antitrust investigation into the company's search and Android businesses. Although antitrust violations could be difficult to prove due to much of the company's offerings being free to users, the investigation can still greatly impact the company's future revenues.
Stock Future
Last Spring, Alphabet has closed its worst trading day since April 2010 after reporting a lowing of adverting numbers, dropping the stock 7.5% and cutting more than $67 billion from the company's market capitalization. Since the company's Q3 earnings miss, Bank of America (NYSE: BAC) has raised its price target for the stock to $1,620 from $1,450, with the investment bank citing a healthy advertising business for the company.
Alphabet reports the company's Q4 and full-year 2019 earnings on Feb. 3. Wall Street analysts are expected the company to report a revenue of $46.9 billion, which will be a year-to-year growth rate of almost 20%.
In addition, Wedbush Securities analyst Daniel Ives has predicted that FAANG (Facebook (NASDAQ: FB), Amazon, Apple, Netflix (NASDAQ: NFLX) and Google) companies will lead the industry's stocks up another 20% in 2020.