Market Overview

When Will Google Inc Stock Reemerge As A Market Leader?

Google Inc Class A shares (NASDAQ: GOOGL) (NASDAQ: GOOG) are stuck in the middle of no-man's land even as the broader market tests and makes new highs nearly every day. What gives?

Google has been a true market leader almost since the stock went public more than a decade ago. However, the stock has recently been signaling that the "law of large numbers" may be coming into play for the company.

It may simply be getting more and more difficult for such a large company to experience the explosive revenue expansion that it saw in its early-growth stages.

What The Bulls Are Seeing

The bulls, as has always been the case with Google, point straight to the fact that the company is a money-printing machine with a beautiful balance sheet, excellent cash flow numbers and the advantage of always having the best, brightest and most innovative minds in the world on its campus.

Related Link: Netflix Breaking 'Good' With More Bingeing To The Upside Likely

Vince Vaughn even wrote a movie about the dream of working at Google.

The bulls also point out that it has never been a good move to bet against this company or stock when it has gone through a period of sluggishness. Those are just periods of consolidation ahead of the next big move, they note. The bulls have historically been correct in that sentiment, but will this time be more of the same?

What The Bears Are Seeing

Google's bears are quick to point out the obvious short-term technical lagginess of the stock. If things are so great with the company, why is the stock still sitting 10 percent below the all-time highs while the broader market in general and the Nasdaq in particular have been setting new highs almost every day recently?

The bearish clique also point to some of the seemingly expensive valuation metrics -– a price-to-book of more than four and a price-to-share of more than six -– as areas of concern. Those arguments are quickly debunked by the fact that the price-to-earnings growth ratio for the stock is only slightly above one –- a modest PEG ratio for a tech leader like Google.

How To Know Who Wins?

Technicians are saying that the stock needs to make a strong upside move soon and take out the $614.44 all-time high, or else a fairly substantial move to the downside may ensue. The bearish scenario for the Google (NASDAQ: GOOGL) (NASDAQ: GOOG) shares is that the stock is just beginning a very short-term “c” wave of an “abc” upside correction, with an absolute ceiling of $608.91.

As long as that level holds up as resistance, the bears are very likely to remain staunch in their opinion and be fading every rally. If they are correct, any rally up to that level would be followed by a move down to the November 2013 pivot low at around $504.25.

However, if first $608.91 is eclipsed and then $614.44, a move up to at least $650 might take place in a hurry.

Stock chart: 
Stock chart

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