1. Alphabet Inc. (NASDAQ:GOOGL)
Forward P/E Ratio: 21.14
Earnings Growth This Year: 31.90%
Number of Hedge Fund Holders: 216
Alphabet Inc. (NASDAQ:GOOGL) is one of the leaders when it comes to internet stocks. At its basics, the company is an international technology hub with operations running in cloud computing, internet search, artificial intelligence, software development, and hardware as well. Its search engine Google has gone on to become a synonym for internet search engine.
While Google continues to maintain it’s market-leading position with more than 91% market share, Alphabet Inc. (NASDAQ:GOOGL) is continuously developing its AI technology. The company has launched its large language model Gemini to compete in the generative AI race. And has plans to invest more than $50 billion in AI development. The company also runs YouTube, which is a video streaming platform.
Apart from this, its cloud business is also soaring with more than 60% of GenAI startups using its Google Cloud. The cloud revenue of the company grew 28.8% year-over-year during the second quarter of 2024. Overall, Alphabet Inc. (NASDAQ:GOOGL) was able to grow its revenue by 14% to reach $84.7 billion.
By the end of the year, management anticipates the company’s revenue to reach $100 billion. What’s truly impressive is its cheap valuation. GOOGL is trading at a forward P/E of 21 and analysts expect its earnings to grow by 32% during the year, making it one of the cheapest internet stocks to invest in now.
Patient Capital Opportunity Equity Strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter:
“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 Alphabet Inc. (NASDAQ:GOOGL) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock 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.
