Time New York: Fri 27 Apr 04:48 am  |  Save 15% on H&R Block Online


Alphabet Just Plucked the Dandelion Out of its Vast Field


Alphabet Inc. GOOGL has spun off geothermal startup Dandelion from X, the company’s “moonshot” division. Dandelion develops affordable geothermal energy systems to heat and cool homes and relies largely on drilling technology.

It will be established as an independent company outside Alphabet and launched in New York State. The company has raised $2 million in seed funding to beef up its expansion efforts in northeastern United States.

Alphabet reportedly owns some equity in exchange for funds, time and resources that it invested in Dandelion. It did not reveal the financial terms of the spin-off.

We believe Alphabet’s continuous focus on maintaining a healthy cash balance coupled with its technological prowess is contributing significantly toward driving up its shares, which have rallied 29.4% compared with the Zacks Internet-Services industry’s gain of 19.1% over the last one year.

Motive Behind the Move

While Alphabet has not been wary of making investments in areas that show real promise, it took some of the boldest decisions to curb down unprofitable businesses such as its decelerating fiber broadband service and drones. It also sold its imaging satellite business.

But with Dandelion, the motive seems to be a little different. According to Dandelion CEO Kathy, “Hannun drilling technology is not a core focus of Alphabet.”

However, we believe the end result to be the same, an improvement in cash from operations. Significant operating cash and a huge cash balance gives management the flexibility to pursue growth in any area that exhibits true potential. This flexibility, along with its technological prowess, allows Alphabet to pursue opportunities in different markets.

Alphabet Inc. Cash from Operations (TTM)

Zacks Rank and Stocks to Consider

Alphabet currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader technology sector include Etsy (ETSY), MiX Telematics (MIXT) and Alibaba (BABA), each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term expected earnings per share (EPS) growth rates for Etsy, MiX Telematics and Alibaba are a respective 20%, 20% and 30.4% respectively.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research
<-- You can share this post with your network,
or give us your opinion and leave a comment.
Be sure to check our RSS feeds for updates.