Alphabet Rallies After Leadership Shuffle

By Akane Otani 

Alphabet Inc. shares are headed toward their best day in months after the co-founders of Google unexpectedly stepped down from active management.

Shares of the internet giant jumped 2% Wednesday, on track to post their biggest one-day gain since Oct. 15.

Wednesday's rally extends the stock's gain for the year to 26% but still leaves it well behind the gains of other technology behemoths like Facebook Inc., Microsoft Corp. and Apple Inc. Those three stocks are all up more than 45% in 2019.

A look at Alphabet's performance shows how worries about regulatory scrutiny and increasing competition for online advertising dollars have taken a toll on a stock that has had a massive run over the course of the bull market.

Since Google completed its reorganization into holding company Alphabet on Oct. 2, 2015, Alphabet's market value has more than doubled to around $911 billion, according to FactSet. Shareholders have been richly rewarded: The stock's price has nearly doubled over that time, whereas the broader S&P 500 has risen 57%.

But the path upward hasn't always been smooth. Shares took a hit earlier this year when regulators said they were launching an antitrust investigation of Google. And while Alphabet's advertising revenue for the third quarter rose to a record $33.9 billion, it missed analysts' expectations.

That has allowed other large tech companies to pull ahead. Amazon.com Inc. passed Alphabet in March 2018 to claim the title of the second biggest U.S. company by market capitalization, behind Apple. Then in May of that year, Microsoft, which has spent years pumping up its cloud-computing business, surpassed Alphabet as well. Today, both Apple and Microsoft have market caps of more than $1 trillion, while Amazon has fallen to around $877 billion, according to FactSet.

Will Alphabet's latest shake-up help the company charge ahead? Sundar Pichai, Google's chief executive, will now have to manage not just Google's search and advertising businesses but also Alphabet's forays into areas like autonomous vehicles and smart cities.

The stock's rally Wednesday suggests investors are pleased -- so far.

Write to Akane Otani at [e-mail]

(END) Dow Jones Newswires

December 04, 2019 13:48 ET (18:48 GMT)

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