None of this means that Google is doing the wrong thing; on the contrary, investing the big and growing cash flows from online advertising into innovative projects to consolidate its competitive strength and expand into businesses with attractive long-term potential is precisely what the company should be doing.
Projects like Android, YouTube and Chrome among others seemed like a waste of time and money before they became remarkable strategic moves, so management has proven that it knows how to read the relevant trends in the industry and apply a long-term vision to the company’s strategy. Larry Page and his team deserve the benefit of the doubt when it comes to making investments with a long-term focus.
Due to the mobile boom and all the new ventures in which Google Inc (NASDAQ:GOOG) is involved, falling profit margins over the next quarters looks like a distinct possibility. Whether investors will give it the Amazon treatment — buying because of a focus on long-term growth prospects — or if Google will be treated like Apple and sold because of fear and uncertainty over falling profitability remains to be seen.
One thing looks clear to me though — the company is doing the right thing by investing for the future, so any short-term margin pressure would be no reason to sell the stock.
The article Google: Short-Term Concerns and Long-Term Opportunities originally appeared on Fool.com and is written by Andrés Cardenal.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.