Source: PaxForex Premium Analytics Portal, Fundamental Insight
Investors who have held shares of Alphabet, Google's parent company, have seen substantial gains over the years. In the last decade alone, the stock has delivered an impressive return of 555%, outpacing the Nasdaq Composite's performance of 299%.
Even in recent times, Alphabet has continued to excel, making it a compelling option for shareholders. However, given its market capitalization now exceeding $2 trillion, some may wonder if adding Alphabet to their portfolio at this juncture is still prudent.
But fear not, as there are compelling reasons why this tech giant remains an attractive investment opportunity.
Alphabet delighted its investors with a 15% revenue growth in the three-month period ending March 31. This marks the fifth consecutive quarter of accelerating year-over-year sales gains, signaling a robust recovery in the global digital advertising market.
Given that more than 75% of Alphabet's revenue comes from advertising services, a favorable industry environment naturally contributes to its success. Notably, both its Search and YouTube segments have delivered strong performances, contributing to its overall growth.
What's particularly noteworthy is that despite generating trailing-12-month sales of $318 billion, Alphabet still sees significant growth opportunities ahead, estimated to reach $1.2 trillion by 2030. With a strategic focus on enhancing artificial intelligence (AI) initiatives to better serve users and advertisers, Alphabet is well-positioned to capitalize on this anticipated growth.
According to consensus analyst estimates on Wall Street, the company's revenue is expected to increase by 11.4% annually over the next three years. Moreover, with ongoing operational enhancements, earnings per share are projected to grow at a compound annual rate of 19.2% during the same period. Such promising prospects are certainly compelling for potential investors.
Investors often perceive tech stocks as risky ventures, but Alphabet stands out as an exception. Confidence in the company's enduring success over the next decade is bolstered by several factors.
First and foremost is Alphabet's robust financial position. With $108 billion in cash, cash equivalents, and marketable securities as of March 31, and a debt burden of only $13 billion, the tech giant enjoys a strong balance sheet. Moreover, the consistent generation of substantial free cash flow each quarter led management to introduce a quarterly dividend. This financial resilience not only enables Alphabet to easily manage its debt obligations but also provides ample resources for continued investment in growth initiatives, irrespective of broader economic conditions.
Alphabet's dominant competitive position is another compelling reason for its long-term viability. Concerns about potential disruptions from competitors like OpenAI's ChatGPT integrating with Microsoft's Bing have been largely overstated, given Google's sustained 90% market share in search even after 18 months since ChatGPT's introduction. Alphabet's vast data resources and powerful network effects serve as formidable barriers to entry, safeguarding its position in the market.
Despite its strong fundamentals and competitive advantages, Alphabet shares are trading at a forward price-to-earnings ratio of just 22.6, presenting an attractive opportunity for investors. Considering the company's potential for growth, robust profitability, and solid economic moat, this valuation appears compelling and warrants serious consideration for investment.
As long as the price is above 160.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 171.39
- Take Profit 1: 175.00
- Take Profit 2: 185.00
Alternative scenario:
If the level of 160.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 160.00
- Take Profit 1: 155.00
- Take Profit 2: 150.00
