5. Alphabet Inc. (NASDAQ:GOOGL)
Forward P/E Ratio: 19.02
Number of Hedge Fund Holders: 234
Analyst Upside Potential: 27.04%
Alphabet Inc. (NASDAQ:GOOGL) is a leading technology company that provides a range of products and services internationally. The company operates through three main segments including Google Services, Google Cloud, and Other Bets. It is known for popular platforms including Google search engine, YouTube, Android, Google Maps, and more.
On March 5, BofA released a statement regarding Alphabet Inc. (NASDAQ:GOOGL). The firm has a Buy rating on the stock, with a price target of $225. BofA noted that Google now processes more than 5 trillion searches annually, a significant increase from the 2 trillion searches reported in 2016. This represents a substantial growth in query volume over the past eight years. Moreover, the query volume has grown at a 12% CAGR from 2016 to 2024. This is notably lower than the 19% CAGR for search revenues during the same period, suggesting that revenue growth has been more influenced by monetization strategies rather than just volume increases. The firm suggested that while strong usage growth has contributed significantly to revenues, improved monetization can add an additional 6 to 7 percentage points of growth annually. Moreover, disclosure of these figures could enhance investor confidence in Google’s ability to leverage new AI technologies effectively over time. Alphabet Inc. (NASDAQ:GOOGL) is one of the most undervalued high-quality stocks to buy according to analysts.
Qualivian Investment Partners, an investment partnership focused on long-only public equities, released its Q3 2024 investor letter. Here is what the fund said:
“Alphabet Inc. (NASDAQ:GOOGL): Q2 2024 revenues and EPS beat expectations, with total revenues growing 14%, Search ad revenues growing 14%, YouTube ads growing 13%, and Google Cloud revenues growing 29%. Revenue growth in the quarter constituted a continued sequential improvement from earlier quarters in the year, suggesting a continued rebound in Alphabet’s core business except for YouTube ad revenues, which missed expectations and showed deceleration in the growth rate as compared to Q1 when it grew 21%. Operating margins improved by 310 bps vs. the same quarter last year.
Management continued to highlight developments with their generative AI program, which is seen as a foundational platform with opportunities across their businesses but particularly in search and cloud. However, this comes with material capex investment well ahead of the expected economic benefits from Gen AI, and the level of spending is leading investors to worry about the ROI on that spend for Alphabet, as well as the other hyperscalers (Microsoft and Amazon). We continue to have confidence in Alphabet’s ability to generate strong revenue, earnings, and cash flow growth well above the S&P 500’s in the years to come and view it as a core holding for the long term.”