About halfway through the Alphabet (GOOGL) quarterly conference call, smack in the middle of the Q&A, it hit me why the naysayers have been so wrong about the FANG stocks -- Facebook (FB) , Amazon (AMZN) , Netflix (NFLX) and Alphabet/Google (GOOG) , (GOOGL) . It came when the Alphabet CEO, Sundar Pichai, was asked a question about the uses of Google and how pervasive the company's products may be in our daily lives.
The uses are vast, he said, and he offered a very simple credo: "We want Google to be the source you think of when you run into a problem."
Now that's a universal declarative about what Google really is about. After all who hasn't run into a problem? Who couldn't use an unbiased trusted source, at that very moment, to solve that problem? We all could. The seven billion people on earth could, and that's exactly the market that Google is shooting for. All seven billion.
Think about it. Who hasn't gotten lost? Google maps is there -- having just added 110 million algorithmically drawn buildings onto their portrayals.
Who hasn't been in a foreign country and had no idea how to ask a question? That translation problem is Google's bread and butter.
Who hasn't tried to remember something and it wasn't possible, or there wasn't time? Google has the answers that billions of people need.
Billions.
How many companies besides Alphabet can claim they have billions of people worldwide clamoring for their wares?
I will tell you how many others: three: Facebook, Amazon and Netflix, that's who. Each of these solves a particular problem in a digital, high-walled fence, way. Amazon solves the problem of getting you a product when you want it, where you want it. Netflix solves the problem of entertaining worldwide by going direct to the consumer via the Internet. And Facebook solves a problem you didn't even know was a problem: the problem of self-expression and keeping in touch via that self expression. It isn't identity theft; it's identity creation. FB, AAPL, AMZN and GOOGL are Action Alerts Plus holdings.
Almost every other company I follow has limits. They are tapped out geographically, or are facing incredible competition. It is always zero sum. There's always someone else. Even Apple (AAPL) suffers from the vicious competition and zero-sum law.
But is there really a competitor in search? How about in retail? In social? In worldwide entertainment via the web?
Alphabet, in particular, has so many different product lines where it is pulling away from its competition that you have to ask yourself, do we really have to be concerned about the cost of acquisition of customers if you are the only game in town? I think that the costs have gone up simply because that's what happens when you go from desktop to mobile. They aren't running out of demand, it's just that the smaller format product is more expensive to dominate. Maybe such worries like acquisition costs or even $5 billion EU fines are just for the small-minded?
It's only in the cloud that there are real competitors, namely Amazon, Microsoft (MSFT) and IBM (IBM) . But the adoption is so early that Pinchai said "I do think there is an inflection point and that's why it feels far from a zero-sum game."
Now I don't mean to be dismissive of so many other chits that Alphabet has in the game. I think that its Waymo autonomous driving platform is way ahead of anyone else's in that category of more than a billion units. They will commercialize this year.
It wasn't that long ago that skeptics were calling for a collapse of Google's YouTube division because advertisers were up in arms about their content appearing next to scatological nonsense.
That's not even a factor anymore.
Android just gets stronger and stronger, despite government intervention in Europe.
Are you late to the Google party now?
I don't think so.
Why not? Perhaps, as CFO Ruth Porat says, "Ninety percent of commerce is still offline -- and we do see a great opportunity for digital to play a bigger role."
If a company is only 10%into its total addressable market, you would call it early. Which is why, even though Alphabet has an $850 billion market cap, there's room for an increase -- as there is with every one of the FANGs.
So, before you chastise me for saying Alphabet and these other FANG stocks deserve to be higher, remember, if they solve problems for people the world over and they can create value for billions of more people, then we have to ask ourselves not if the stocks are too high, but if they are, indeed, too low.
