4. Alphabet Inc Class C (NASDAQ:GOOG)
Number of Hedge Fund Investors: 165
Alphabet Inc Class C (NASDAQ:GOOG) is apparently in a no-holds-barred fight against competitors in the AI race that according to many threatened the bread and butter of Alphabet Inc Class C (NASDAQ:GOOG): its search business. However, many analysts believe Alphabet Inc Class C (NASDAQ:GOOG) is making a big turn and will continue to grow. Alex Kantrowitz, Big Technology founder, while talking to CNBC last month, said that the present for Alphabet Inc Class C (NASDAQ:GOOG) is looking “real good” amid revenue growth, leadership’s harsh stance against those “making trouble” inside Alphabet Inc Class C (NASDAQ:GOOG), dividends and buybacks.
Latest data analyzed by Bank of America shows that across all devices, Google’s market search in search actually gained half a percentage point in May on a MoM basis. BofA analyst Justin Post said this shows Alphabet Inc Class C’s (NASDAQ:GOOG) AI Overviews are “aiding query growth and usage.”
Alphabet Inc Class C (NASDAQ:GOOG) bulls believe Alphabet Inc Class C (NASDAQ:GOOG) is just getting started with AI product launches. Alphabet Inc Class C (NASDAQ:GOOG) is indeed in a strong position to develop an AI ecosystem around its products. For example, demos have shown that Gemini app will help people perform daily personal tasks like note taking, appointments, writing, etc. These features could easily be integrated with other Alphabet Inc Class C (NASDAQ:GOOG) apps. Alphabet Inc Class C’s (NASDAQ:GOOG) goal is to urge users to sign up for ‘Google One AI Premium’ plan, which has a $19.99 price tag. Analysts also believe Alphabet Inc Class C (NASDAQ:GOOG) is in a strong position to offset any headwinds or lost market share in Google search with YouTube, which saw its ads revenue reach $8.1 billion in the first quarter, a 21% growth. Alphabet Inc Class C’s (NASDAQ:GOOG) net income in the period came in at $23.66 billion, up 57%, or $1.89 per share.
Alphabet Inc Class C (NASDAQ:GOOG) bulls believe the market is not incorporating Alphabet Inc Class C’s (NASDAQ:GOOG) growth in Cloud, Other Bets, Video and other high growth initiatives. The stock is trading 20x Alphabet’s 2025 EPS estimate of $8.57. This multiple makes the stock look attractively valued since the Wall Street expects Alphabet Inc Class C (NASDAQ:GOOG) earnings to grow by 13.40% in 2025 and by 19% over the next five years on a per annum basis.
Lakehouse Global Growth Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its April 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) delivered a strong quarterly result that came in well ahead of analysts’ expectations. Revenue grew 15.4% (16.0% constant currency) to $80.5 billion and operating income grew 46.0% to $25.5 billion. Revenue growth accelerated across Search, YouTube Ads, and Google Cloud, all whilst the company delivered its highest operating margin since 2021 – showing meaningful progress in the company’s efforts to durably re-work their cost structure. On the Generative AI front, management emphasised the company’s infrastructure advantages including 5th generation TPUs(chips developed by Google specifically for AI training and inference), high performance data centre architecture, and AI models that are 100x more efficient versus 18 months ago. Overall, we believe that Alphabet is well placed for the AI opportunity ahead and still has significant latent earnings power. When combined with a relatively undemanding valuation of 21x forward net profit and over $100 billion of cash on the balance sheet, it’s not hard to see why we remain positive on the range of outcomes in the years ahead.”
