Alphabet Inc (Nasdaq: GOOGL, GOOG) had a bit of a hiccup in the past couple of weeks, dropping more than 4.5 percent as investors took profits on 2017 gains. However, the stock has since bounced back, and GBH Insights chief strategy officer and head of technology research Daniel Ives says long-term investors shouldn’t worry about short-term market volatility headed into what should be another stellar year for Alphabet.
According to Ives, the bar is high for Alphabet subsidiary Google in 2018, but the company has consistently demonstrated it can rise to the occasion. Ives says Google has a number of key growth drivers that should help the stock maintain its positive momentum in 2018.
“The main growth drivers and key fuel in the engine for Google/Alphabet into 2018 remain mobile search, YouTube, and overall advertising strength, which have clear tailwinds heading into 2018 in our opinion based on recent results and our ad survey tracker work this quarter,” Ives says.
YouTube will likely be the centerpiece for Google in 2018 as the secular shift toward online advertising continues. YouTube has more than 1.5 billion users who spend an average of 60 minutes per day on the platform, and Ives says Google will continue to improve its monetization of YouTube’s massive audience.
For long-term investors, Ives says the key metric to watch for Alphabet will be traffic acquisition costs. In the most recent quarter, Google reported $5.24 billion in traffic acquisition costs, up from $4.18 billion a year ago.
“We continue to believe that improving TAC trends into 2018 are a major part of the Google narrative going forward, as mobile advertising impression success holds the key to the advertising kingdom, in our opinion,” Ives says.
He says mobile advertising revenue will be particularly important for Alphabet in 2018, especially in light of intensifying mobile competition. However, Google has…
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