BY MARK SEBASTIAN
September 16, 2024
Here the question is, is AI Google’s friend or is it Google’s enemy.
The answer to this question is the key to whether you want to buy or sell GOOGL.
If the answer is yes, than there is so much upside for googl, their ownership of search and implementation of AI will help them make more from advertising as audiences will be even better targeted.
It will also help with google shopping as the AI bot will be able to deliver items for the consumer to buy in real time as they search.
The revenue will potentially explode, that is why GOOGL took off in the spring, despite the issues they had with BARD (terrible name) traders were betting that the stock would take off. Genesis, the new AI engine they are working is not yet ready for prime time, so we have to see.
Now…here is the downside…what if Googl is unable to properly implement AI and AI does become a thing (which Im not 100% sold on the way Wall Street is).
If AI explodes and GOOGL is not participating where does that leave googl? The answer….they are your landline.
Remember landlines? They were fun…they had an ANSWERING MACHINE….HOW COOL.
No one has one and no one uses one. Googl is in real danger here.
Fundamentally, if you buy into the former argument and can get past the regulatory risk GOOGL is a steal on a relative basis.
Its PE is only 21, the Revs and Income are huge…the stock is a buy.
If the later argument is true, then we are dealing with a CVS, CVS has a PE of 10…but that is because it is shrinking.
I think long term we need to see what happens with Genesis, but you could talk me into a long dated call spread….near term….that is why we have Licia.
Alphabet (Ticker: GOOGL) has been in a selloff since July 10, 2024.
After peaking out at its all time high of $191.75 it bottomed out at $147.22 and guess what … that is right on my median line:
That support is holding as GOOGL has rallied seven bucks from there.
There is a bit of resistance just above here at $154.96.
A close above there will take GOOGL to $161.
After being oversold, the Relative Strength Index has climbed back above 30 which is bullish.
Support sits at the bottom of the gap created on Thursday at $151.50 and then back at the median line at $147.22.
I am bullish GOOGL over $155.
GOOGL is falling into a state of volatility indolence
Mark well documented the fall of GOOGL from previously great heights. AI is GOOGL’s biggest threat but also biggest opportunity if it can harness and monetize. For now the stock is in a slow steady decline and has brought the average realized volatility, how the stock is trading, to 1 year lows for the last 90 days. That is the story of a stock in decline.
Implied volatility is on the lower end of the spectrum but still trading at or above the realized volatility. This might make a decent iron condor. GOOGL not prone to takeover but it can gap. I would look at leading with the short put spread and move into the short call spread on a rally.
GOOGL 1 year chart with 90 day realized vol in purple, IV30 in red
Frank called the antitrust action a while ago and usually that kills a stock’s momentum in the short term. That is a good recipe for a short vega, shorter term trade.
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