1. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 202
The Best Cash App Stock, Alphabet Inc. (NASDAQ:GOOGL) has transformed itself into a true technology giant, producing tens of billions of dollars in free cash flow every year with solutions spanning from advertising to cloud computing and self-driving automobiles. Even though Alphabet’s primary search business has been the subject of antitrust concerns, the company’s overall strength is that it continues to lead in several areas, including search, artificial intelligence, video, and cloud computing. To enable users to make payments, it provides the Google Wallet app for Android.
In Q3 of 2024, a 35% increase in Google Cloud revenue is the primary driver of Alphabet Inc. (NASDAQ:GOOGL)’s record revenue growth, with consolidated revenue up 15% year over year. Significant advancements have been made in AI and cloud computing; for example, Google Cloud generated $1.9 billion in operating income with a 17% operating margin, while Gemini models had an over 14x increase in API calls over a six-month period. Over the last four quarters, YouTube has surpassed $50 billion in total ad and subscription revenue, with ad revenues rising 12% year over year. In just 18 months, Alphabet has lowered machine costs per query by more than 90% due to its developments in AI infrastructure, which include data center investments and specialized GPUs. The company’s autonomous car business, Waymo, has strengthened its position as the industry leader by reaching one million miles driven entirely on its own each week and growing its collaboration with Uber. These accomplishments demonstrate Alphabet’s ongoing expansion and innovation in its major businesses.
Google and the Saudi Central Bank (SAMA) have recently teamed up to establish Google Pay in Saudi Arabia through the “mada,” the country’s payment system. The service is expected to go live in 2025.
Analyst Brian Pitz of BMO Capital increased his price objective for Alphabet Inc. (NASDAQ:GOOGL) from $217 to $230 and maintained his Outperform rating for the company’s stock. As a result of positive channel inspections, the company is also seeing an increase in Search, GCP, and YouTube income. In a research note, BMO informs investors that although Gemini unlocks TAM potential due to its capacity to handle complicated inquiries, PMax is boosting ROAS for Search. Gemini/Vertex AI’s middle-layer advancements are helping GCP. It adds that YouTube’s lower-funnel QR codes are popular with advertisers.
Oakmark Equity and Income Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q4 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOGL) was the top contributor during the quarter. Despite ongoing litigation with the Department of Justice in its antitrust case, the U.S.-headquartered interactive media and services company’s stock price rose after posting solid third-quarter earnings. In the Search division, the company generated low-teens year-over-year revenue growth and management highlighted that they’re seeing strong user engagement with their new AI Overviews feature. The biggest upside surprise came from the Cloud division, where revenue growth accelerated to 35% and margins reached a record of 17%. This performance was driven by client demand for AI Infrastructure and Generative AI Solutions as well as core Google Cloud Platform (GCP) products. We continue to believe Alphabet is a collection of great businesses that can unlock further value over the long term through its world-class AI capabilities.”
Overall, Alphabet Inc. (NASDAQ:GOOGL) ranks first on our list of the 10 Best Cash App Stocks To Buy According to Hedge Funds. While we acknowledge the potential for GOOGL to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GOOGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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