In this article, we will discuss the 10 Unrivaled Stocks of the Next 10 Years.
Growing a business is not an easy task. Several factors come into the picture when you talk about growth. In 2019, McKinsey reported that ~50% of the companies that enjoyed healthy and stable shareholder returns but didn’t see top-line growth were either acquired or delisted. Growth is getting tougher amidst new market dynamics such as higher consumer expectations, competitive intensity, and digital disruption. Growth can only be rewarded to businesses that spot opportunities at hyper-granular levels and then seize them quickly.
Pricing Power Remains Critical, Says Legendary Investor
Warren Buffett, the billionaire CEO of Berkshire Hathaway Inc., mentioned that he tends to rate businesses based on their ability to increase prices. He pays so much attention to the pricing power that he sometimes doesn’t even consider the people who are managing the business. Buffett has had a successful career of stock picking and takeovers.
The veteran investor has bought companies in the business of railroads and electricity producers, whose pricing power comes from a dearth of competitive options available to their clients. Buffett has also built stakes in several consumer discretionary companies relying on the appeal of their brands to bring in customers.
Forecasts for 2024
Wall Street analysts expect that S&P 500 companies are expected to report steady earnings growth in 2024. They anticipate a ~5.4% earnings growth in 3Q 2024 and over ~15% earnings growth in 4Q 2024. The S&P 500’s forward price-to-earnings ratio sits at ~22.40x as of August 30. The 10-year average forward price-to-earnings ratio came at ~17.9x, suggesting that the stock valuations might be slightly stretched.
Moving forward, the US presidential election remains the most significant potential market catalyst for 2H 2024. Landsberg Bennett Private Wealth Management believes that inflation numbers might surprise to the upside towards the end of 2024 and into 2025. This is because year over year comparables might become more difficult and the effects of increased Chinese shipping rates start reflecting in the inflation data points.
Equity Market Outlook Amidst Uncertain Macro-Economic Environment
A “higher-for-longer” backdrop favoured larger and higher-quality companies that are less cyclical and rate-sensitive. Such companies were supported by mania in Artificial Intelligence/Large Language Models (AI/LLM) stocks. JPMorgan believes that, in the US equities, momentum crowding and stock market concentration reached multi-decade extremes.
Market volatility in the US remains low, with VIX averaging only ~14 for the year to July 2024. This was mainly because of fundamental and technical factors, such as rising markets, risk complacency, and lower realized correlation, among others.
In Europe and other areas, the broader equities were supported by improved economic activity and the expectation of multiple Fed cuts at the start of 2024. However, the growth-policy trade-off might worsen in 2H 2024. JPMorgan believes that “there is a risk of disappointment.” The large bank expects that the Fed might stay ‘higher-for-longer,’ US activity momentum might decelerate and there can be a softening of pricing and top-line growth. Collectively, this might hurt earnings delivery in 2H 2024. Therefore, investing in stocks with wide economic moats and companies having significant market share should help offset the losses in the remainder of 2024.
With this in mind, let us now have a look at 10 Unrivaled Stocks of the Next 10 Years.
A trader at a stock exchange, vigorously watching the stocks’ trends in the stock market.
Our methodology
To list 10 unrivaled stocks of the next 10 years, we sifted through wide moat ETFs and checked online rankings. Next, we narrowed our list by filtering out the companies that have held a near-monopoly status for years or decades. Finally, we ranked the stocks in ascending order of the number of hedge funds that hold them, as of 2Q 2024.
Note: The date market shares of companies is sourced from investment research reports, CSI Market, IBIS World, and market research agencies, among other sources.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Unrivaled Stocks of the Next 10 Years
10) Fortinet, Inc. (NASDAQ:FTNT)
Number of hedge fund holders: 42
Fortinet, Inc. (NASDAQ:FTNT) is a cybersecurity vendor that sells products, support, and services to small and midsize businesses, enterprises, and government entities.
The company enjoys a majority market share of over ~65%, which positions it for long-term growth. Fortinet, Inc. (NASDAQ:FTNT)’s established customer switching costs, together with an increasingly potent network effect make up its wide economic moat. Over the next decade, the company is expected to materially benefit given that secular tailwinds in network security and vendor consolidation can increase its value proposition to the clients.
The advanced technologies, extensive product portfolio, and significant market presence are expected to act as principal growth enablers for Fortinet, Inc. (NASDAQ:FTNT). Its proprietary FortiASIC technology and integrated Security Fabric architecture are expected to differentiate Fortinet, Inc. (NASDAQ:FTNT) from its competitors. Additionally, its ability to innovate and adapt to cybersecurity threats further enforces the leadership position.
The company released its 2Q 2024 financial results, with total revenue reaching $1.43 billion, up 11% YoY, and service revenue coming at $982 million, up 20% YoY. The company’s financial results were aided by significant investments in Unified SASE and Secure Ops markets. Also, acquisitions of Lacework and Next DLP contributed to Fortinet, Inc. (NASDAQ:FTNT)’s growth.
For 3Q 2024, the company expects billings of between $1.530 billion – $1.600 billion and revenue of between $1.445 billion – $1.505 billion. Notably, 24 analysts gave a “Hold” rating, and 9 analysts have issued a “Buy” rating on the shares of Fortinet, Inc. (NASDAQ:FTNT).
Insider Monkey’s 2Q 2024 data revealed that 42 hedge funds had stakes in Fortinet, Inc. (NASDAQ:FTNT).
Conestoga Capital Advisors, an asset management company, released its first-quarter 2024 investor letter. Here is what the fund said:
“Fortinet, Inc. (NASDAQ:FTNT): FTNT is the worldwide market share leader in network security firewalls (by units). During the quarter, FTNT reported a significant beat in billings, showing early gains from the strategic pivot to non-firewall solutions (SASE, SecOps) announced late last year. This follows two consecutive disappointing quarters, and the stock has nearly recovered to 2023 highs. While FTNT is still digesting a pull forward of product-led growth, the recovery appears to be on the right track and should drive higher than expected margins in 2024.”
9) Moody’s Corporation (NYSE:MCO)
Number of hedge fund holders: 59
Moody’s Corporation (NYSE:MCO) is the leading provider of credit ratings on fixed-income securities. Moody’s ratings segment, Moody’s Investors Service or MIS, consists of corporates, structured finance, financial institutions, and public finance ratings.
Moody’s Corporation (NYSE:MCO) is one of Warren Buffett’s favorite stock picks mainly due to its near-monopoly position in the credit ratings business and resilient business structure which sustains any business environment. This is because individual loans and corporate bond assignments tend to increase during a low-interest rate environment. When interest rates are high, the company gets corporate risk management work.
Moody’s Corporation (NYSE:MCO) enjoys a wide economic moat, given its capabilities in Analytics and Investor Services segments, with elevated margins, recurring revenue, and numerous growth opportunities. The company has built a strong reputation and uses advanced financial models that are difficult to copy. Apart from these factors, its brand reputation, technological innovation SaaS offerings, and pricing power contribute to its wide economic moat. In 2021, the company’s management confidently increased the pricing of its ratings offering. This was done to mitigate the impact of inflation. The increased borrowing due to the pandemic ensured strong demand and companies paid the extra price of the ratings.
The company saw strong financial performance for 2Q 2024, with Moody’s Analytics business’ revenue growing 7% from the prior-year period due to strong demand for Moody’s proprietary data and unique analytical insights.
Analysts at Barclays raised the price target on shares of Moody’s Corporation (NYSE:MCO) from $450.00 to $500.00, giving it an “Overweight” rating on 24th July. At the end of Q2 2024, 59 hedge funds in Insider Monkey’s database owned stakes in Moody’s Corporation (NYSE:MCO).
8) Intercontinental Exchange, Inc. (NYSE:ICE)
Number of hedge fund holders: 70
Intercontinental Exchange, Inc. (NYSE:ICE) is a vertically integrated operator of financial exchanges and provides ancillary data products. The company operates as a large derivatives exchange, too.
Intercontinental Exchange, Inc. (NYSE:ICE), which is a near monopoly business, enjoys a strong economic moat as its businesses have economies of scale, network effects, and industry structure that are difficult to replicate. Talking about derivatives and listing, there are very limited substitutes, providing the company with a sustainable competitive advantage.
Also, Intercontinental Exchange, Inc. (NYSE:ICE) is expected to benefit from the fact that it is vertically integrated. This means that it has control over the execution and clearing of contracts. Therefore, it can exert pricing power and attract volumes. The company can also improve counterparty and systemic risk management.
Intercontinental Exchange, Inc. (NYSE:ICE) reported financial results for 2Q 2024, with consolidated net income coming at $632 million on $2.3 billion of consolidated revenues, less transaction-based expenses. Its 2Q 2024 results were driven by strong performances in energy markets and mortgage technology. Moving forward, it expects continued growth with a clear focus on leveraging its core strengths. Notably, revenue synergies and recurring revenue growth should have a significant impact in 2025 and 2026.
Analysts at Keefe, Bruyette & Woods gave an “Outperform” rating on the shares of Intercontinental Exchange, Inc. (NYSE:ICE). They provided a price target of $168.00 on 6th August. In the second quarter of 2024, 70 hedge funds were long Intercontinental Exchange, Inc. (NYSE:ICE) as per Insider Monkey’s database.
Third Point Management, a New York-based investment advisor, released its second-quarter 2024 investor letter and mentioned Intercontinental Exchange, Inc. (NYSE:ICE). Here is what the fund said:
“During Q2, we added to our position in Intercontinental Exchange, Inc. (NYSE:ICE). We originally invested in ICE in April 2023 when the FTC’s challenge to the company’s proposed acquisition of Black Knight impacted the share price. While the deal overhang has lifted, we believe a re-rating opportunity from a structural and cyclical acceleration of growth is still ahead. Importantly, we expect that AI will drive new growth opportunities across most of ICE’s businesses, extending the runway for value creation.
ICE is a collection of dominant information services and exchange assets that automate diverse and large asset classes (Energy, Mortgages, Fixed Income, Rates and Equities) while producing vast amounts of proprietary data. CEO Jeff Sprecher has led ICE for over 20 years. Under his visionary leadership, the company has compounded organic revenue and EPS at ~5% and ~15%, respectively, and adopted new modalities through organic investment and strategic acquisitions, most notably creating the flagship clusters of Energy and Mortgage, franchises we believe are of very high business quality. On the horizon, we expect an acceleration of growth to a consistent low double digit organic algorithm in these businesses, and a re-rating of the stock as price follows value creation…” (Click here to read the full text)
7) The Sherwin-Williams Company (NYSE:SHW)
Number of hedge fund holders: 76
The Sherwin-Williams Company (NYSE:SHW) is the largest provider of architectural paint in the United States. The company has the largest market share in the Paint Stores industry, in which they make up over ~65% of total industry revenue.
The company has a wide economic moat mainly due to its strong brand value and robust pricing power. The strength of The Sherwin-Williams Company (NYSE:SHW)’s brand is visible in its recognition among both DIY enthusiasts and professional customers. This brand recognition should translate into strong and stable growth over the next 10 years.
Next, pricing growth forms an integral part of the company’s overall growth strategy. The company can pass on any cost inflation to its end customers.
Both the competitive advantages work hand-in-hand for The Sherwin-Williams Company (NYSE:SHW). Since it enjoys strong brand value, DIY and professional customers are less price-sensitive when it comes to paint pricing. Also, the company’s margins are expected to benefit from the vertical integration. Its tight control of supply chain and distribution enables the company to manage costs and be responsive to adjust prices.
The Sherwin-Williams Company (NYSE:SHW) has released 2Q 2024 results, with consolidated net sales increasing 0.5% in the quarter to reach $6.27 billion and EBITDA rising 12.1% to $1.44 billion. As a result of strong performance in the Paint Stores Group in 2Q 2024, the company was able to execute its strategy. For FY 2024, it anticipates diluted net income per share in the range of $10.30 – $10.60.
BMO Capital Markets increased their target price on shares of The Sherwin-Williams Company (NYSE:SHW) from $360.00 to $386.00, giving it an “Outperform” rating on 24th July. As per Insider Monkey’s 2Q 2024 database, 76 hedge funds held stakes in The Sherwin-Williams Company (NYSE:SHW).
6) ASML Holding N.V. (NASDAQ:ASML)
Number of hedge fund holders: 81
ASML Holding N.V. (NASDAQ:ASML) is the leader in photolithography systems, which are used in the manufacturing of semiconductors. Photolithography refers to the process in which a light source is used to expose circuit patterns from the photomask onto a semiconductor wafer.
ASML Holding N.V. (NASDAQ:ASML) enjoys a significant moat in the lithography market. Its systems are the most advanced in the world, because of which its would-be competitors would require a significant amount of expertise to operate. The company also has a long-term monopoly on EUV lithography systems. EUV refers to the most advanced lithography technology, which finds its usage in the manufacturing of the smallest and most complex chips.
The company’s leading competitive advantages include intangible assets, cost advantages, and switching costs. Over the next decade or so, ASML Holding N.V. (NASDAQ:ASML) should remain the top lithography provider for semiconductor foundries, or fabs. This is because of its technological leadership and large R&D budget, which acts as a big entry barrier. Also, there are high switching costs for semiconductor foundries whose plants are designed from ASML Holding N.V. (NASDAQ:ASML)’s lithography machines.
ASML Holding N.V. (NASDAQ:ASML) is dominant in its lithography market, having an ~82.9% market share. Experts have tagged this company as a “kingpin” or “key enabler of several important sectors”, which includes mobile communications, data centers, and artificial intelligence (AI).
Susquehanna increased its price target on shares of ASML Holding N.V. (NASDAQ:ASML) from $1,200.00 to $1,300.00, giving it a “Positive” rating on 11th July. As per Insider Monkey’s 2Q 2024 database, ASML Holding N.V. (NASDAQ:ASML) was in the portfolios of 81 hedge funds.
Polen Capital, an investment management company, released its fourth-quarter 2023 investor letter and mentioned ASML Holding N.V. (NASDAQ:ASML). Here is what the fund said:
“Netherlands-based ASML Holding N.V. (NASDAQ:ASML) and Japan-based Lasertec play dominant roles within different segments of the global semiconductor industry. In both cases, shares rallied significantly in the fourth quarter of 2023, prompting our positions to grow as a percentage of the overall portfolio. We believe both companies will see demand for their products as extreme ultraviolet (EUV) lithography and soon high-numerical aperture lithography must be utilized to manufacture the world’s smallest chips. However, in our estimation, 2024 could deliver a year of less exciting growth for the semiconductor industry, which prompted us to trim these positions back.”
5) Intuit Inc. (NASDAQ:INTU)
Number of hedge fund holders: 82
Intuit Inc. (NASDAQ:INTU) is a provider of small-business accounting software, personal tax solutions, and professional tax offerings. The company has the largest market share in the Tax Preparation Software Developers industry, making up over ~70% of total industry revenue.
Intuit Inc. (NASDAQ:INTU) has now transitioned into a cloud-first company. Therefore, the company can now use its customer data to streamline the user experience throughout its products and to market its offerings. This should help Intuit Inc. (NASDAQ:INTU ) in terms of switching costs and building a network effect, which make up the company’s wide economic moat. The company enjoys market leadership and brand recognition, helping it dominate the US market for small-business accounting and DIY tax filing software.
Intuit Inc. (NASDAQ:INTU) has been launching Intuit Assist across its product lines. This is a GenAI-powered digital assistant. This will help Credit Karma users select new credit cards, QuickBooks customers to project their cash flows, and Mailchimp customers to create targeted email marketing campaigns. Also, it will help TurboTax customers understand changes in their tax returns.
Intuit Inc. (NASDAQ:INTU) continues to shift its customer base to subscription offerings. This should help in achieving revenue growth moving forward as this can create a recurring revenue stream. Apart from enhancing revenue visibility, it will also foster customer loyalty and will reduce churn rates.
Analysts at Bank of America upped their price target on shares of Intuit Inc. (NASDAQ:INTU) from $730.00 to $780.00. They gave a “Buy” rating on 23rd August. In Q2 2024, the number of hedge funds in Insider Monkey’s database with stakes in Intuit Inc. (NASDAQ:INTU) increased to 82 as compared to 77 in the preceding quarter.
Baron Funds, an investment management company, released a second quarter 2024 investor letter. Here is what the fund said:
“GenAI has captured the market’s imagination, but it’s still very early in the user adoption of this new technology, and the financial payoff from investments into GenAI models and infrastructure is still unknown. We are focused on investing in strong businesses that will be improved by AI, even if this improvement takes time to materialize. Intuit Inc. (NASDAQ:INTU) has been rolling out Intuit Assist, a GenAI powered digital assistant, across its product lines to help Credit Karma users select new credit cards, QuickBooks customers forecast cash flow, Mailchimp customers create targeted email marketing campaigns, and TurboTax customers understand changes in their tax returns from the prior year. We consider these GenAI advancements to be evolutionary rather than revolutionary, but we continue to closely monitor the impact of new technologies on the fintech industry.”
4) Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of hedge fund holders: 156
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s largest dedicated contract chip manufacturer, or foundry having more than 60% market share. The company makes integrated circuits for customers based on their proprietary IC designs.
The company enjoys a wide economic moat due to its technological leadership, scale, and reputation. Also, strong brand recognition and high barriers to entry further solidify its competitive advantages. Its economic moat also stems from the cost advantage and intangible assets, which are realized due to its leading position in process technology, or nodes.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) possesses an even larger market share (~90%) of advanced chip manufacturing. This includes 3-nanometer chips, which continue to gain popularity and are becoming standard, and advanced chip packaging for larger components.
Well-renowned names, such as Apple Inc. (NASDAQ:AAPL) and NVIDIA Corporation (NASDAQ:NVDA), rely on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) to make their chips. This is because no other company can provide its capacity or technological expertise.
The company’s leading position in advanced processes should help it attract and retain more customers, see more stable utilization of production capacities, and lower production costs. Therefore, over the next decade or so, it should generate sufficient profits to finance R&D and capital expenditures on subsequent nodes.
Needham & Company LLC upped its price target on the shares of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) from $168.00 to $210.00. They gave a “Buy” rating on 15th July.
Ariel Investments, an investment management company, released its 2Q 2024 investor letter. Here is what the fund said:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) also traded sharply higher in the quarter, following its annual shareholder meeting where management highlighted robust earnings visibility. The boom in AI investment is driving significant demand for the semiconductor hardware that enables it. TSMC currently holds a dominant position in relevant chip manufacturing and packaging. Additionally, although AI investments have been mostly focused on the datacenter market, Apple’s recent announcement on “Apple Intelligence” kickstarted an Edge AI race—which will likely drive greater than expected semiconductor growth in smartphones. TSMC is Apple’s sole foundry partner which bodes well for the future. Overall, we continue to view TSMC’s scale, technology, business model, customer service and execution favorably. The fact the company remains committed to returning capital to shareholders through both buybacks and dividends is another plus.”
3) Visa Inc. (NYSE:V)
Number of hedge fund holders: 163
Visa Inc. (NYSE:V) operates a retail electronic payments network. It provides global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses, and government entities.
Undoubtedly, the company is the leader in the payments industry, and its strong network effect and pricing power make up the wide economic moat. Millions and billions of Visa cards are being used around the world which are accepted at over 130 million merchant locations. If customers using Visa continue to increase, it will look more attractive to merchants as a result of a potentially big market. As and when merchants taking Visa cards increase, more and more customers will plan to use them.
Next, the company should continue to benefit from its large scale. As a result of this competitive advantage, Visa Inc. (NYSE:V) generates unmatched profits. In 3Q 2024, its GAAP net income sat at $4.9 billion or $2.40 per share, reflecting an increase of 17% and 20%, respectively on the YoY basis. Visa Inc. (NYSE:V) controls more than ~60% of the US market for credit and debit cards.
The company’s network has become more valuable due to the increase in places and ways in which it can be used. It primarily grows by tapping a greater share of global payment volume.
Bank of America reissued a “Neutral” rating on the shares of Visa Inc. (NYSE:V), giving the stock a $297.00 price target on 10th July. As of the end of the second quarter of 2024, 163 hedge funds out of the 912 funds tracked by Insider Monkey had stakes in Visa Inc. (NYSE:V).
Aoris Investment Management, a specialist international equity manager, released its Q2 2024 investor letter and mentioned Visa Inc. (NYSE:V). Here is what the fund said:
“Visa Inc. (NYSE:V) operates the world’s largest payments network, which facilitates the movement of money between merchants, financial institutions, consumers, businesses, and governments.
The company is best known for enabling consumers to make debit and credit card payments. In the year to September 2023, 4.3 billion Visa cardholders made 213 billion transactions on its network, to a total value of US$12.1 trillion.
Compared to cash and cheques, which are still widely used around the world, Visa’s network is a more convenient, secure, and ubiquitous way for consumers to pay. Visa has invested to reduce friction and fraud in the payments experience, to the benefit of both merchants and consumers…” (Click here to read the full text)
2) NVIDIA Corporation (NASDAQ:NVDA)
Number of hedge fund holders: 179
NVIDIA Corporation (NASDAQ:NVDA) is the designer of discrete graphics processing units that enhance the experience on computing platforms. Its chips are used in several end markets, such as high-end PCs for gaming, data centers, and automotive infotainment systems. The company accounts for over ~90% of the market share for GPUs.
NVIDIA Corporation (NASDAQ:NVDA)’s competitive moat remains powerful as it has been investing for more than a decade in software in such a way that allows its hardware to outperform regular silicon. This outperformance takes place as a result of software optimizations and acceleration libraries which are updated constantly.
Undoubtedly, NVIDIA Corporation (NASDAQ:NVDA) has a strong economic moat, thanks to its intangible assets regarding its graphics processing units, and switching costs involved around its proprietary software, like the CUDA platform for AI tools. This lets developers use the company’s GPUs to build AI models. Just like iOS, which locks people into the iPhone since developers are making applications for the iPhone, market experts believe that this same thing is happening for NVIDIA Corporation (NASDAQ:NVDA). The AI engineers are learning the CUDA platform to program GPUs.
The company released its 2Q 2024 financial results, with record quarterly revenue of $30.0 billion, up by 15% from 1Q 2023 and up by 122% on a YoY basis. The company’s record revenues were supported by the fact that global data centers continue to modernize the entire computing stack with accelerated computing and generative AI.
Rosenblatt Securities reaffirmed a “Buy” rating on the shares of NVIDIA Corporation (NASDAQ:NVDA), giving a price target of $200.00 on 29th August.
Aoris Investment Management, a specialist international equity manager, released its Q2 2024 investor letter and mentioned NVIDIA Corporation (NASDAQ:NVDA). Here is what the fund said:
“If Information Technology was the dominant sector for the quarter, NVIDIA Corporation (NASDAQ:NVDA), which is the largest supplier of microprocessors used for generative AI applications, was the dominant company. NVIDIA’s share price rose by a third in the quarter and has increased by 255% so far this year. Since the beginning of 2023, its market value has risen by 8.3x, or $4.3 trillion, making NVIDIA the third largest company in the world by this measure.
As a result of the unusually strong stock price performance from NVIDIA and a few other large companies, equity markets have become increasingly concentrated. You can see this in the chart below, which shows that on 30 June, 27% of the market value of the 500 largest US companies was attributable to just five companies, more than twice the average of the last 20 years.
The composition of the Aoris International Fund will always be very different to that of the broader equity market. There will be periods, such as the most recent quarter, where this contributes to our performance lagging that of our benchmark. When it comes to NVIDIA and other AI-centric companies, rapid growth is exciting, but it makes it difficult for us to judge what is normal. Our preference is to own established leading companies where we can make a more confident, evidence-based judgement about their growth and profitability.”
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.
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