As the competition in the online retail space contines to heat up, many investors are wondering where they should invest. While every company has its pros and cons, some offer better value than others. Today, I will discuss two hot tech stocks, Alphabet Inc. (GOOG, Financial) (GOOGL, Financial) and Amazon.com Inc. (AMZN, Financial).
Alphabet
The tech behemoth and Google parent company recently launched its new Shopping Actions program, giving customers an easier way to shop for products from major retailers like Walmart (WMT, Financial), Costco (COST, Financial), Home Depot (HD, Financial) and Target (TGT, Financial). These companies have partnered with Google in an attempt to fight the supremacy of Amazon, leveraging the power and dominance of Google’s search engine.
Rather than earning advertising revenue from these partnerships, Google is monetizing the program by getting a cut of each purchase made through its common shopping cart. The program also allows Google to monetize voice searches through Google Assistant.
Amazon
Amazon's stock has surged 35% so far this year, compared with just 4% for Google. Currently, Apple (AAPL, Financial) is the only company that is more valuable than the e-commerce giant, having just surpassed Google in terms of market value.
Investors are flocking to Amazon because they believe the company will keep growing and become even more profitable, particularly in the cloud computing sector. Revenues from this division should help provide the cash the company needs to invest in projects, including opening more brick-and-mortar stores and building more data centers.
According to Goldman Sachs, Amazon stock could “easily” hit $1,900 this year. For the bank, the company is still undervalued and forecasts regarding its cloud and retail business are too low. On the other hand, analysts like Bill Smead, chief investment officer of Smead Capital Management, think traders should forget about buying Amazon because its price is unrealistically high. According to Smead, shares in solid businesses can still tumble, like Walt Disney (DIS, Financial) in 1972 and Cisco Systems Inc. (CSCO, Financial) in 1999-2000, especially when the stocks have “extremely” high earnings ratios, which was defined as anything over 60. Amazon’s is currently north of 300.
Alphabet vs. Amazon
While both companies offer potentially profitable trading opportunities, Google’s Shopping Actions program is a genuine game changer. Its shares are also cheaper than Amazon’s.
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