Alphabet Inc (GOOGL) and the Ever-Growing Headaches

 
 

It really wasn’t that long ago that investors were downright skeptical about Alphabet Inc (NASDAQ:GOOGL) stock.

Google stock (it was then traded under ticker GOOG, in the days before the company reorganized into Alphabet) didn’t move for pretty much all of 2010 and 2011. Investors were concerned that increasing mobile usage would hurt the company’s ad rates — so-called cost-per-click (CPC) — and eventually its profits.

Those fears weren’t limited to Google, of course. A similar argument dogged Facebook Inc (NASDAQ:FB); one key reason FB stock dropped by more than half in the months after its May 2012 IPO.

What’s somewhat ironic about those fears — in spite of Google stock more than tripling from those 2010/2011 levels — is that they weren’t entirely baseless. CPC pressure indeed has continued. A 23% decline year over year in Q2 was a big reason GOOGL stock declined after earnings, pulling back after hitting $1,000 for the second time.

Those fears are a big reason I’ve been somewhat bearish on Google stock for the past few months. And the problem for GOOGL stock now is that its CPC headaches are being joined by a number of other problems. Google stock isn’t a short at current levels by any means. But investors expecting a third run to $1,000+ may have to wait longer than they hope.

Legal and Regulatory Concerns and Google Stock

The $2.7 billion fine slapped on Alphabet by the European Union isn’t, on its own, that big a deal. As InvestorPlace columnist Nicholas Chahine pointed out at the time, the fine is tiny against the current $650 billion market capitalization of Google stock. Alphabet already has appealed and won’t pay that fine for years, if ever.

The impact of the EU antitrust action goes beyond just the fine. Bear in mind that Microsoft Corporation (NASDAQ:MSFT) spent years…

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