YouTube TV’s Explosive Growth Is A Reason To Buy Alphabet Inc Stock
Alphabet Inc (NASDAQ:GOOG) is a go-to big growth at a big discount stock in this epic bull market. I’m a big fan of big tech stocks, and an especially big fan of GOOG stock.
Google stock has roared 43% higher over the past year, including a sizzling 10% rally in the past month alone. The big run may have some thinking that GOOG stock may be nearing a top.
Short term, it might be. The relative strength index is in overbought territory. The 20-day moving average is about as far above the 50-day moving average as it has been over the past year. Therefore, this might be a near-term peak in GOOG stock.
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But that doesn’t mean its time to sell Google stock. This is a long-term growth stock supported by secular growth catalysts. And one of those secular growth catalysts just got a big boost.
Today, reports are surfacing that YouTube TV has crossed the 300,000 subscriber mark. Google’s over-the-top (OTT) live TV offering is a cost-saving alternative to traditional cable packages. But even if its cheaper than cable alternatives, $35 a month with 300,000 subscribers still translates into $126 million in annual revenue for Google.
But at just $126 million annual revenue versus Google’s $800 billion market cap, is YouTube TV really a reason to buy GOOG stock?
Absolutely. Here’s why.
YouTube TV Will Be Huge
There’s no hiding it. Cord-cutting is happening everywhere. It started a few years back, and its still accelerating . The value proposition of traditional cable packages simply doesn’t compare to the value prop of OTT entertainment services like Netflix, Inc. (NASAQ:NFLX).
When it comes to cable, you get a bunch of live TV channels for $100 per month. When it comes to Netflix, you get a seemingly unlimited portfolio of video content for $11 per month.
It just doesn’t make sense to have cable — unless you really value live sports and live news.
And the majority of Americans do value live sports and live news. Roughly 60% of Americans are sports fans, and the list of most watched television broadcasts in US history is dominated by sporting events (specifically, the Super Bowl). Moreover, television is still the most common news source for Americans. Roughly 50% of Americans get their news from television.
So why haven’t the majority of Americans cut the cord yet? Sports and live news. Those aren’t on Netflix.
But sports and live news are going OTT, meaning its only a matter of time before a majority of Americans cut the cord.
Last year, Google launched YouTube TV. YouTube TV is essentially Google’s attempt to create a robust live-streaming TV offering tailored to the world of internet TV. You pay a set monthly bill ($35) for access to 40-plus live-streaming channels (including all the big ones, like ABC, CBS, NBC, FOX, ESPN, and FX). You also get unlimited cloud DVR space, 6 accounts per household, and can watch from a phone, tablet, TV, or computer.
In other words, its Netflix for live TV.
And just like Netflix has taken off over the past several years, YouTube TV will take off over the next several years.
YouTube TV already has 300,000 subscribers, but that is just the tip of the iceberg. Nearly 200 million Americans still pay around $100 per month for cable TV, even in the world of Netflix, Hulu, and Amazon Video. They do it because they want access to live sports and live news.
But with YouTube TV offering all those things for just $35 per month, we will see a huge shift of those 200 million Americans from cable packages to YouTube TV.
Will YouTube TV get to 200 million subs? No. There are competitors in this space, like Hulu Live and DirecTV Now. But as this massive pay-TV sub base switches to over-the-top live TV offerings, YouTube TV’s user base will grow immensely.
Bottom Line on GOOG Stock
YouTube TV’s impending, explosive growth is just one of many reasons to buy and hold GOOG stock for the long term. There is also the burgeoning cloud business, the still strong digital ad business, the potentially explosive self-driving business, the booming smart home business, and much, much more.
All together, there is no reason to sell GOOG stock here. It may be maxed out in the near term, but this stock will head significantly higher in the long term.
As of this writing, Luke Lango was long GOOG.
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