2) Alphabet Inc. (NASDAQ:GOOG)
10-Year Revenue Growth Rate: ~18.3%
10-Year Net Income Growth Rate: ~20.9%
Number of Hedge Fund Holdings: 165
Alphabet Inc. (NASDAQ:GOOG) provides numerous products and platforms in the US, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America.
Wall Street analysts believe that Alphabet Inc. (NASDAQ:GOOG)’s growth momentum is expected to stem from the intangible assets concerning its overall technological expertise in search algorithms and AI, along with access to and accumulation of valuable data for numerous advertisers. Furthermore, its competitive advantages include its network effect, cost advantage, and customer switching costs. The company’s core advertising business remains entrenched in advertising budgets, enabling Alphabet Inc. (NASDAQ:GOOG) to benefit from secular growth in digital advertising spending.
Wall Street analysts believe that the company possesses a significant opportunity in the lucrative public cloud space since Alphabet Inc. (NASDAQ:GOOG) is a key cloud vendor for enterprises looking to digitize their workloads. With autonomous driving gaining a significant amount of traction, the company is the frontrunner of innovation in AVs. On 25th October, Alphabet Inc. (NASDAQ:GOOG)’s self-driving unit Waymo mentioned that it closed a $5.6 billion funding round.
The company released its Q3 2024 results, with consolidated revenues increasing 15%, or 16% in constant currency, YoY to reach $88.3 billion. This growth reflects strong momentum throughout its business. Google Services revenues went up by 13% to $76.5 billion. This growth was due to the strength across Google Search & other, Google subscriptions, platforms, and devices, and YouTube ads. Notably, YouTube’s total ads and subscription revenues exceeded $50 billion over the past 4 quarters for the first time.
JPMorgan upped the price target on the shares of Alphabet Inc. (NASDAQ:GOOG) to $212 from $208, keeping an “Overweight” rating post Q3 2024 earnings. Alphyn Capital Management, an investment management firm, released its Q3 2024 investor letter. Here is what the fund said:
“Alphabet Inc.’s (NASDAQ:GOOG) solid quarterly performance, with revenue growth of 14% and improved margins improving from 29% to 32%, has been overshadowed by ongoing investor concerns regarding future capital expenditures for AI and antitrust risks.
In August, a federal judge ruled that Google illegally monopolized the search and advertising markets in the United States by using exclusive agreements with browser developers, smartphone makers, and wireless carriers. A second trial is scheduled for 2025 to determine enforcement remedies, with a final decision not likely before 2026, given the strong likelihood of Alphabet appealing any decision. Potential remedies may include making search engine data available to competitors and ending agreements to secure its search engine as a default on mobile devices. For example, Alphabet currently pays $20 billion annually for Google to be the default search engine on Apple products. Although regulatory challenges are never positive, Google’s strong brand and consumer preference have limited the impact of previous restrictions. In Europe, Russia, and Turkey, Google search market share declined by only 2%, 7%, and 12%, respectively, when regulators limited its use as the default option.
Another trial focuses on Alphabet’s Ad Tech platform, where the DOJ alleges that the company has monopolized the digital advertising market. Closing arguments are expected in the coming weeks, and a ruling against Alphabet could undermine Google’s dominance in the online advertising ecosystem. Additionally, after the end of the quarter, Alphabet was ordered to open its Android operating system to rivals, allowing them to establish their own app marketplaces and payment systems to compete with Google Play Store. This followed a loss to Epic Games, the developer behind Fortnite, in a December ruling last year. I will continue to monitor these developments and respond accordingly.”
