We recently published a list of the 12 Best Long-Term Growth Stocks to Buy Now. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOG) stands against other best long-term growth stocks to buy right now.
Expectations Regarding Fed’s Rate Cuts in 2025
Released on Friday, February 7, the January jobs report showed resilience in the labor market with higher-than-expected wage growth. December’s monthly job gains also showed an upward revision, highlighting that the US labor market ended 2024 in a better position than previously reported. Economists are thus of the opinion that the Federal Reserve may not cut rates in the near future. Consequently, this increases pressure on inflation data to cool down before the central bank considers slashing borrowing costs.
On January 30, Jeffrey Gundlach, CEO of DoubleLine Capital, appeared on CNBC’s “Closing Bell” to discuss the stock market and the Fed’s decision to leave rates unchanged. Sticking to the opinion he gave in December, Gundlach was of the view that 2025 would bring a maximum of two rate cuts by the Fed. He reiterated that he was not predicting two cuts but that two would be the maximum number attained in 2025, keeping one rate cut as the base case for the year. The unemployment rate went up for several consecutive months before ticking down, which Gundlach thinks is a matter of deep solace for the chair of the Federal Reserve, Jerome Powell.
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What Does the 2025 Outlook for the Stock Market Look Like?
On February 10, Mary Ann Bartels, Sanctuary Wealth’s chief investment strategist, appeared on CNBC to discuss the 2025 outlook for the stock market. She showed bullish sentiment towards the market, particularly due to strong earnings growth. Comparing the current environment to previous periods of innovation, such as the 1920s and the 1990s, Bartels highlighted the role of robotics, AI, and Web3 in driving long-term growth in the present.
She noted that companies today fund investments with cash and equity rather than excessive leverage, unlike the 1990s. Her estimates showed that the S&P could reach 7,200 to 7,400 this year and 10,000 to 13,000 by the decade’s end, as she expects the bull market to extend through 2029 to 2030.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 20 growth stocks. We checked their 5-year revenue growth (at least above 15%) and then selected the top 12 most popular stocks among elite hedge funds as of fiscal Q3 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? 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).
A laptop and phone open to Google’s services in an everyday setting.
Alphabet Inc. (NASDAQ:GOOG)
5-Year Revenue Growth: 16.68%
Number of Hedge Funds: 202
Alphabet Inc. (NASDAQ:GOOG) is a holding company with segments including Google Services, Google Cloud, and Other Bets. The Google Services segment operates various services and products, including Android, Google Maps, Google Play, Chrome, Search, and YouTube. It is the largest digital advertising company in the world, with the search engine Google holding approximately 90% global market share. In the US alone, Google has more than 75% market share for desktop and 95% for mobile searches, making it one of the most significant revenue drivers for the company.
Alphabet Inc. (NASDAQ:GOOG) also operates a successful cloud business, an autonomous vehicle unit called Waymo, and even sells devices. Fiscal Q4 2024 showed a 12% growth in overall revenue for the company, along with a 12.5% growth in search revenue. YouTube grew by 13.8%, while revenue from Google Cloud rose by around 30% to $12 billion. Analysts are bullish on the stock, and its median price target of $187.74 implies an upside of 11.86%.
Merion Road Capital Management stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q4 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOG): We have held GOOG for a long time (since 2018) on the basis of its immense business quality paired with an undemanding valuation, improving treatment of minority shareholders, and multiple options for value creation. Recently we have seen Alphabet bashed for losing the AI race to now heralded for its progress. I remain excited about their prospects with several near-term, mid-term, and long-term tailwinds. Near-term, Google Cloud continues its rapid growth and their latest large language model, Gemini 2.0, appears to have made significant progress to better serve consumer needs and improve GOOG’s other product offerings. Mid-term, Waymo is on the cusp of becoming a real value driver for the company; there are abundant articles discussing Waymo stealing share from the ride-share economy and launching in new geographies. Long-term, GOOG’s recently announced quantum computing chip positions it well for a future (many, many years away) where computing process are fundamentally different than today. All of these options are embedded in a company that already has an established and dominant earnings stream.”
Overall, GOOG ranks third on our list of best long-term growth stocks to buy right now. While we acknowledge the potential of GOOG, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GOOG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
