Source: PaxForex Premium Analytics Portal, Fundamental Insight
Alphabet's stock has experienced significant fluctuations over the past three months, initially rising before facing a downturn, and now showing an 11% increase in 2024. Recent weeks have seen investors showing renewed enthusiasm for the company's outlook, propelling its shares into record territory. While this may deter some investors from considering adding Alphabet to their portfolio, it's crucial to approach the situation with a fresh perspective and evaluate its potential over the coming years.
With a history spanning more than two decades, a market capitalization nearing $2 trillion, and 2023 revenue reaching $307 billion, Alphabet stands as a dominant force in the internet industry. Its remarkable success can be attributed to its ownership of some of the most widely used services globally.
Google Search, for instance, commands a staggering 91% of the global market share, serving as the company's flagship segment and contributing to 57% of its total sales last year. Additionally, YouTube boasts approximately 2.5 billion users, surpassing even Netflix in terms of TV viewing time, according to Nielsen data.
Furthermore, Google Cloud ranked as the third-largest player in the cloud computing market, demonstrated impressive 26% revenue growth in the fourth quarter and has maintained positive operating income for four consecutive quarters.
Concerns among investors regarding Alphabet's position in the artificial intelligence (AI) race, stemming from initial setbacks with product introductions, seem to have diminished, evident from the stock's 10% rise in March. This shift in sentiment suggests that investors may have moved past these challenges.
Considering Alphabet's longstanding status as a leading tech and internet company, coupled with its substantial financial resources, extensive data assets, and widespread adoption of its products and services, it appears to be uniquely positioned to excel in the AI landscape.
Despite Alphabet's shares reaching near all-time highs, investors may still perceive the current valuation as reasonable. With a forward price-to-earnings ratio of 22.8, the stock trades at a slight premium to the S&P 500 but at a discount compared to its peers within the "Magnificent Seven."
Given this appealing valuation, investors are gaining access to a business positioned for continued robust growth. According to consensus analyst estimates on Wall Street, Alphabet is forecasted to achieve a 10.6% increase in revenue and a 15.9% rise in earnings per share, on average, over the next three years. Assuming the valuation multiple remains stable, shareholders stand to benefit significantly.
While it's prudent to approach analyst forecasts with caution, the outlook for Alphabet seems credible in this scenario. The company is supported by several powerful secular trends that bode well for its future performance.
Alphabet stands to benefit from the growing global internet user base and increasing usage per person, reflecting the ongoing trend of digitization. This trend is expected to drive higher levels of ad revenue for Alphabet.
In the realm of streaming entertainment, Alphabet is well-positioned to capitalize on the expanding market. YouTube, in particular, is likely to maintain its status as a top choice among viewers amid the evolving landscape of the streaming wars.
Furthermore, with the cloud computing market projected to reach nearly $1.6 trillion by 2030 according to Grand View Research, Alphabet's Google Cloud segment presents a formidable player in the industry. Already boasting renowned customers like Wendy's, Bloomberg, and PayPal, Google Cloud holds promise for Alphabet's future growth.
In summary, investors may find it beneficial to add Alphabet to their portfolio given its favorable valuation and promising growth prospects.
As long as the price is above 150.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 157.13
- Take Profit 1: 165.00
- Take Profit 2: 170.00
Alternative scenario:
If the level of 150.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 150.00
- Take Profit 1: 140.00
- Take Profit 2: 130.00
