8 Best AdTech Stocks to Buy Now

3) Alphabet Inc. (NASDAQ:GOOGL)

Number of Hedge Fund Holders: 222

Alphabet Inc. (NASDAQ:GOOGL) owns Google which accounts for 99% of the company’s revenue, out of which over 85% is from online ads.

Investors and experts continue to favour Alphabet Inc. (NASDAQ:GOOGL) primarily because of its strong 2Q 2024 results, which were supported by its Cloud business and AI infrastructure business. The tech giant’s revenues came in at $85 billion in 2Q 2024, reflecting a rise of 14% YoY. This increase came on the heels of Search as well as Cloud, which for the first time crossed $10 billion in quarterly revenues and $1 billion in operating profit. Revenue from Google Cloud business went up by ~29% YoY to $10.35 billion.

Optimism around the Google Cloud business continues to prevail, thanks to Alphabet Inc. (NASDAQ:GOOGL)’s AI infrastructure and large language models, which continue to gain popularity. This should help the company as demand for cloud-based AI infrastructure and services is anticipated to become a $397.81 billion market (as per Fortune Business Insights). This means that the market should compound at over ~30% during 2023-2030.

Google Cloud revenue has been outpacing the overall revenue growth of the company. Therefore, this significant opportunity in the cloud AI market might fuel the company’s overall growth. The stock currently trades at ~21.51x its forward earnings, which is at a discount compared to Nasdaq-100’s NTM earnings multiple of ~24.4x.

Stifel Nicolaus covered the shares of Alphabet Inc. (NASDAQ:GOOGL), and gave a “Buy” rating. The brokerage gave the price target of $196.00 on 15^th May 2024. As of the first quarter, the stock is held by 222 hedge funds with stakes worth $32.3 billion.

Patient Capital Management, a value investing firm, released its second quarter 2024 investor letter. Here is what the firm said about Alphabet Inc. (NASDAQ:GOOGL):

“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.”