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Plato Grishin
Plato Grishin

Buy Alphabet Stock

Alphabet stock is a better buy than I've seen in a long time. I think the current down environment for advertising is a short-term blip and the company will return to growth (albeit slower than in the past) in the next few years. Getting the stock for a price this cheap seals the deal.

buy alphabet stock


While many unprofitable growth tech stocks saw their share prices plummet in 2022, a result of investor sentiment souring on these speculative businesses, even the most dominant companies weren't immune to a declining market. For example, Alphabet (GOOGL 1.54%) (GOOG 1.48%), one of the most successful enterprises ever, experienced a stock drop of 39% last year.

There's no doubt that Alphabet, like every other business, is dealing with the weaker macro environment. But investors shouldn't be so shortsighted and automatically turn down the stock. Instead, it's critical to take a step back and focus your attention on the bigger picture. According to data provided by Statista, Alphabet commands a 28% share of the global digital advertising market that is expected to eclipse $1 trillion by 2027.

After the stock dropped 39% in 2022, and it has been relatively flat so far in 2023 (as of this writing), Alphabet shares are currently trading at a price-to-earnings (P/E) ratio of 17. This is substantially cheaper than the trailing-10-year P/E of 29, demonstrating how negative investor sentiment has become.

Investors might be concerned that Alphabet's market cap of $1.1 trillion means that there isn't much in the way of future return potential. I have also thought about this same issue. But I think it's flawed thinking to simply assume that a stock can't produce wonderful returns just because the company is already massive.

On Jul. 15, 2022, Google conducted one of the largest stock splits in history. It was a 20-for-one split, meaning that any investor with a share of GOOG or GOOGL stock before the split had 20 shares of the stock after the split. This affected all share classes of Google stock, making the shares significantly more affordable to retail investors.

Alphabet also has a class of B shares that are only owned by insiders, and do not trade on stock exchanges. The B shares are thus owned by Sergey Brin, Larry Page, Eric Schmidt, and a few other directors. Unlike A shares that confer one vote per share, shareholders of B shares receive 10 votes.

"If the geniuses at this company who know us better than we know ourselves say split, then I think we'll end up welcoming a whole new cohort of investors to the market, one that's been missing out for years: people with enough disposable cash to buy 10 shares of a $150 stock, but not enough money to buy one share of a $2,900 stock," the "Mad Money" host said.

Alphabet announced the stock split on Tuesday at the same time it reported better-than-expected earnings and revenue for its fourth quarter. The plan, which requires shareholder approval, would go into effect in July. Alphabet shares jumped 7.5% in Wednesday's session.

"Every study I've ever seen tells me that when stocks split, they go up big on the announcement and then stay up. I know that makes no sense mathematically ... but the stock market runs on emotion, not on math," he said.

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Investing in Alphabet through one of these methods is a savvy move to gain exposure to GOOGL while enjoying the benefits of a more diversified portfolio (because index funds contain a broader mix of stocks).

Aside from retirement accounts like 401(k)s or IRAs, most investors these days own stocks through brokerage accounts. These types of investment accounts, also referred to as online trading platforms, have revolutionized investing. For better or worse, they allow everyday people to easily buy and sell stocks right from their computers or even smartphones, often with little or no commission fees.

In addition to stocks, many brokers let you invest in ETFs, index funds, mutual funds and sometimes even cryptocurrencies. Money chose Fidelity as the best overall broker of 2022, in part, because it has no account fees or minimum deposit required to open an account. Betterment, Ameritrade, E*Trade and Charles Schwab are also notable brokers with their own niches.

The company offers two classes of common stock. GOOGL is Class A common stock, with voting rights. GOOG is Class C common stock, which carries no voting rights. The company has also issued Class B shares but those are held almost solely by its founders and have ten votes per share, which allowed the founders to retain control over the company.

In July 2022, both GOOG and GOOGL effected a 20:1 stock split, replacing each share with 20 shares, and reducing the price per share to 5% of the pre-split price. This is a fairly common practice when the board feels a stock carries too high a price, making it intimidating to investors. A split can result in increased interest in the stock, driving up the price.

Fright night came a little early for Alphabet this year, with a sharp drop off in the share price. On Oct. 25, 2022, GOOGL closed at $104.48, but the next day, the stock dropped significantly to close at $94.93, a decline of over 9%. GOOG suffered a similar decrease. In all, both Alphabet stocks are down about 30% so far this year.

No one has a crystal ball, of course, but analysts at Wallet Investor predict that Alphabet stock will continue to perform well over the next several years. Its price prediction algorithm estimates the stock will trade at these prices over the next three years:

As for where will Google stock be in 2030, AI Pickup noted that the share price might be expected to be around at a high of about, $144.05, around a 31% average increase from its initial price as of Oct. 31, 2022.

Alphabet, Inc. (GOOG, GOOGL) stock has clearly been on an upward trajectory, although it is slightly more volatile than the overall market, with a beta of 1.10. Every investor should know that past performance is not an indication of future results, but past performance and fundamentals are all that can be used to make a purchasing decision. And, in the case of Alphabet, Inc., past performance indicates that shareholders are very happy indeed.

But according to Bank of America, there have yet to be any negative signs that suggest Google's core business is deteriorating at the expense of the newly launched ChatGPT, and that should entice investors to buy the stock.

Now, with sentiment in Alphabet's stock deteriorating and the stock significantly underperforming the Nasdaq 100, investors should consider buying the stock, according to the note. The bank reiterated its "Buy" rating and $125 price target, which represents potential upside of about 40% from current levels.

The bank said the bull case behind Alphabet includes its headstart in artificial intelligence and machine learning, potential upside in YouTube Shorts, a renewed discipline in expense management and stock buybacks, an a compelling valuation.

While old-school metrics are not perfect for any company, they are at least worth checking in on for Alphabet and its peers. So here are price-to-earnings (P/E) valuations for the same trillion-dollar stocks, based on consensus earnings estimates for the next 12 months among analysts polled by FactSet, along with total return figures through May 20:

Five years ago, did you imagine that Alphabet would carry a trailing 12-month P/E ratio of around 16.4x? Probably not, and many traders would have jumped at the chance to buy GOOGL stock at such a valuation. Yet, here we are, and people are afraid to accept this gift from Wall Street.

He also believes the S&P 500 (SPX) could surge to 4,625 this year. Needless to say, the stock market is showing signs of a recovery. Key risk factors such as supply-chain woes and inflationary pressure are starting to moderate, which has drawn the attention of investors and analysts alike.

Turning to Wall Street, Boeing earns a Moderate Buy consensus rating based on 10 Buys and four Holds assigned in the past three months. The average BA stock price target of $218.77 suggests 5.05% upside potential.

Turning to Wall Street, Alphabet earns a Strong Buy consensus rating based on nine Buys assigned in the past three months. The average GOOGL stock price target of $126.13 suggests 35.4% upside potential.

The company said late Tuesday it will increase its outstanding shares by a 20-to-1 ratio, aiming to entice the numerous small investors who have flocked to the stock market during the pandemic. The shares jumped 10% in U.S. premarket trading on Wednesday, and were set to surpass their record high reached last November. 041b061a72


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