Source: PaxForex Premium Analytics Portal, Fundamental Insight
As a pioneer in the realm of technology and the proprietor of some of the most widely used internet services, Alphabet stands as one of the most triumphant enterprises in history.
Investors have reaped substantial rewards, with shares witnessing a fivefold surge in the past decade - a remarkable accomplishment surpassing the Nasdaq Composite Index's performance.
However, our focus is on the future. As the current year draws to a close, the question arises: Is it plausible for Alphabet shares to surge by 48% from their current price, reaching $200 by the end of 2024? Let's assess the factors that would make this scenario a reality.
Macroeconomic challenges led to a notable deceleration in revenue growth for Alphabet throughout 2022. Concerns about an impending recession impacted advertising spending.
Nevertheless, the situation has been gradually improving. Over the last three quarters, Alphabet has witnessed a resurgence in sales gains. In the most recent quarter (Q3 2023, ending Sept. 30), revenue surged by 11% year over year, reaching $76.7 billion.
The resurgence in the digital advertising market is contributing to this positive momentum. Major industry players like Meta Platforms and Amazon have also reported robust growth in advertising revenue.
For this positive momentum to persist, an improvement in the economic landscape is crucial. As inflationary pressures ease, there is potential for the Federal Reserve to consider interest rate cuts in 2024. Such a move could act as a catalyst for economic activity, presenting greater revenue opportunities for Alphabet.
The company must also explore avenues to enhance its profitability. Similar to many tech firms, Alphabet underwent significant layoffs to streamline operations following the pandemic boom. This has resulted in a more efficient enterprise, evident in the Q3 operating margin of 28%, exceeding the 25% from the year-ago period.
Ruth Porat, President and Chief Investment Officer of Alphabet, emphasized on the latest earnings call the strategic focus on accelerating revenue growth at a pace exceeding expenses. Shareholders undoubtedly seek continued progress in this regard.
While a $200 price target isn't entirely implausible, Alphabet stands as one of the most dominant companies globally, benefiting from the internet's rise and positioning itself as a leader in artificial intelligence. The anticipation of robust fundamental results is reasonable, supported by evident signs of improvement.
However, let's scrutinize what a $200 per share target implies. This projection necessitates a 48% rise over the next 12 months, a feat achieved by Alphabet shares in only six of the years since its 2004 initial public offering. Achieving two consecutive stellar gains is uncommon.
Furthermore, reaching $200 per share would surpass the stock's all-time high of $150 set in November 2021, establishing a market cap of approximately $2.5 trillion. Such an achievement within the next 12 months appears improbable, even with the appealing current forward price-to-earnings ratio of 23.5.
While optimism for this outcome by the end of 2024 is limited, long-term bullish sentiments for Alphabet's stock provide ample reason to consider acquiring shares at present.
As long as the price is above 129.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 133.25
- Take Profit 1: 140.00
- Take Profit 2: 145.00
Alternative scenario:
If the level of 129.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 129.00
- Take Profit 1: 123.00
- Take Profit 2: 118.00
