1) Alphabet Inc. (NASDAQ:GOOGL)
Number of hedge fund holders: 216
Alphabet Inc. (NASDAQ:GOOGL) is a holding company and the internet media giant, Google, is its wholly-owned subsidiary.
The internet giant enjoys a wide economic moat given its durable competitive advantages, which are derived from its intangible assets, and its network effect. Alphabet Inc. (NASDAQ:GOOGL) possesses significant intangible assets with its overall technological expertise concerning algorithms and AI (machine learning and deep learning), and access to and accumulation of valuable data for advertisers. Regardless of its actual technological competency, the company’s search engine is regarded as being the most advanced in the industry. As a result of these factors, Alphabet Inc. (NASDAQ:GOOGL) retains an impressive share of just over ~80.0% of the global desktop search market.
Moving forward, Alphabet Inc. (NASDAQ:GOOGL)’s revenues are expected to be primarily supported by continued growth in digital ad spending from Asia-based retailers. Also, YouTube should benefit from strong reach and usage frequency. Its video-only content format is attractive to the brand advertisers.
Alphabet Inc. (NASDAQ:GOOGL) should be able to defend its search dominance over the next decade with its own AI technology. The company is focused on investing in AI to drive growth throughout its offerings, such as advertising and Cloud.
Analysts at Wolfe Research initiated coverage on the shares of Alphabet Inc. (NASDAQ:GOOGL) on 16th July. They gave an “Outperform” rating, with a price target of $240.00 per share.
Patient Capital Management, a value investing firm, released its 2Q 2024 investor letter and mentioned Alphabet Inc. (NASDAQ:GOOGL). Here is what the fund said:
“Alphabet Inc. (NASDAQ:GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first-quarter earnings, a new $70B repurchase program (3% of shares outstanding), and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising, and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well-positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
While we acknowledge the potential of GOOGL as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than the ones mentioned on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
