Source: PaxForex Premium Analytics Portal, Fundamental Insight
Alphabet's stock has experienced a significant surge in the past year, outpacing the S&P 500 with a 52% gain. This rally is attributed to the recovery of tech stocks, the resurgence of digital advertising, and the growing adoption of artificial intelligence. Despite this remarkable performance, investors are grappling with the decision of whether to anticipate a pullback or join the momentum and invest further in Alphabet.
The positive momentum is underpinned by Alphabet's improving financial results, particularly in the advertising sector, which constitutes a substantial portion of its revenue. Google, maintaining its position as the global search leader with over 91% market share, is a critical driver for digital advertising, contributing significantly to Alphabet's revenue. With an estimated 39% share of global digital ad revenue last year, Alphabet is poised to benefit from the anticipated 13% year-over-year spike in digital ad spending in 2024.
Alphabet's strong fourth-quarter performance, with a 13% year-over-year revenue increase to $86.3 billion, signals a revival in the advertising market. This rebound could be a catalyst for further stock appreciation.
Additionally, Alphabet's involvement in cloud services, specifically Google Cloud, positions the company as the third-largest cloud infrastructure provider globally. While trailing behind Amazon Web Services and Microsoft Azure, the move to the cloud is considered a foundational element of the digital transformation, offering Alphabet another avenue for growth.
While concerns about a potential pullback linger, the positive indicators, including the recovery in the advertising market and the strategic position in cloud services, suggest that Alphabet might have further growth potential. Investors must weigh these factors carefully when deciding whether to capitalize on the current momentum or anticipate a market correction.
The discussion surrounding the pivotal role of cloud infrastructure services in delivering generative AI to users is gaining momentum, and Google Cloud stands as a frontrunner in this domain.
With its Vertex AI service, Google Cloud provides a comprehensive solution for users looking to integrate AI into their operations. Boasting 130 prebuilt foundation models, Vertex AI streamlines the development process, enabling users to efficiently create, deploy, and scale AI-powered applications.
A notable addition to Google Cloud's suite of products is Google Gemini, touted as the company's "largest and most capable AI model." Crafted to assimilate information from diverse sources such as audio, video, text, images, and even computer code, Gemini showcases its prowess through the Ultra model, which outperforms current benchmarks on 30 out of 32 widely used academic assessments of AI performance.
Alphabet, the parent company of Google, is currently valued at approximately 24 times trailing earnings, presenting a discount compared to the S&P 500's price-to-earnings (P/E) ratio of nearly 28.
The potential impact of generative AI is challenging to quantify precisely, offering Alphabet a promising position as a major beneficiary of this ongoing trend. With multiple growth drivers on the horizon and a robust track record of growth, the current valuation suggests an opportune moment to consider investing in Alphabet stock. As the landscape of generative AI unfolds, Alphabet stands poised to leverage this secular tailwind for sustained growth in the foreseeable future.
As long as the price is above 130.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 133.21
- Take Profit 1: 145.00
- Take Profit 2: 155.00
Alternative scenario:
If the level of 130.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 130.00
- Take Profit 1: 120.00
- Take Profit 2: 115.00
