How would Alphabet Stock perform in a recession?
Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) may seem like a recession-resistant business. After all, his Google search engine would always get a lot of traffic in tough times. But keep in mind that this is essentially an advertising business. In this fool live clip, recorded on December 6, Fool.com contributors Matt Frankel and Danny Vena discuss how they think the tech giant would hold up in tough economic times.
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Danny Vena: If you look at Alphabet, if you look at what Google is doing, of course every time there is a market downturn, one of the things that we see happening historically is that companies will cut their marketing spend very quickly. When that happens, of course, one of the biggest digital advertisers in the world is Google, bar none. It’s a business that’s going to take a hit in the short term, but it’s also one of the first places where, once the economy stabilizes in a downturn, people want to go back there and get their money back. marketing expenses. back up so they can revive income. While I think Google is a good place to put your money, I’ve ranked it at the bottom of the ones we’ve got due to that initial hit it’s going to take.
Matt Frankel: It’s just. Past downturns suggest that you are correct that we will see companies curb advertising. We saw it during the first half of 2020.
Danny Vena: We were doing.
Matt Frankel: Not just Google. I invest in a company called External media (NYSE: OUT), it is a billboard and outdoor advertising company. And one of their big sources of income is advertising in metro systems like transit systems. Businesses weren’t spending on it because no one was going anywhere. The same happens in a downturn, when in a general downturn when people just don’t have the money to spend, you’ll see a lot of advertisers slowing down their spending.
I didn’t quite agree with this one. I ranked it more towards the middle of the pack simply because I think their company will hold up quite well when it comes to advertising value for the dollar. Many companies consider Google ads to be one of the best places to spend their money. So I think this is one of the last forms of advertising to get cut. I mentioned that outdoor advertising would probably be removed before any type of internet advertising. But I totally agree that it will be more volatile than some of the other names on the list.
Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. Daniel Vena owns Alphabet (A shares). Matthew Frankel, CFP® is the owner of Outfront Media. The Motley Fool owns and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool recommends Outfront Media. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.