When it comes to finding the best long-tern tech stocks, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is name every investor should not miss out on. With excellent reach through its assets such as Google Cloud, Google Search, and YouTube, GOOG stock is set for success.
In its Q4 2023 report revenue rose by 13%, net income by 52%, and a price-earnings ratio of 25-times was showcased. Despite excellent financial standing, the stock remains undervalued.
Recent mishaps, notably Gemini, raised concerns, but Alphabet’s core strengths remain.
Moreover, Alphabet’s exceptional financial performance has shone over the years. With 18.7% compound annual revenue growth, it tackles vast markets effectively. Analysts project continued double-digit gains. Generating $285 billion in operating cash flow in three years, Alphabet conducted significant stock buybacks, reducing shares by 10% in five years.
Despite Gemini’s setbacks, Alphabet remains a promising investment.
Rough Roads on Gemini
Amid controversy over its AI product Gemini and co-founder Sergey Brin acknowledging a flaw, GOOG stock endured market turbulence. GOOG stock declined 3% in the last five days and 2% YTD, following a +52% surge last year.
Anmuth acknowledges Google’s leadership and culture scrutiny but expresses optimism in its ability to overcome challenges. He anticipates Google’s recovery with Gemini and closing the Gen AI gap. Recent Gemini issues highlighted Google’s execution, leadership, and culture. Despite this, Pichai ensures significant Gemini enhancements, including product guidelines, launch processes, testing, and technology improvements.
Google Search maintained steady revenue growth while concerns emerged over its search and advertising market share. Meta and Amazon advertising surpassed Google’s, signaling a potential market dynamics shift.
Google focused on cost structure re-engineering for margin expansion without significant layoffs. The company prioritized revenue growth, emphasizing rationalization over significant staff reductions.
Possible Dividends?
JPMorgan expects Google to continue capital returns, potentially through share buybacks, following years of significant repurchases. Anmuth suggests a dividend initiation, aligning with recent moves by Meta Platforms and Booking Holdings.
While a dividend could attract investors, Anmuth emphasizes the importance of overall business performance. The industry awaits Google Cloud Next, focusing on how Google will address challenges and demonstrate resilience in the evolving tech landscape.
When There’s a Dip, Buy It
Alphabet is one of the Magnificent Seven stocks, but GOOG stock hasn’t excelled recently. Still rated “B”, Alphabet offers shareholder value. Google dominates the US search market and earns from Google Cloud. Despite recent AI chatbot setbacks, Alphabet advances in an expanding automotive niche.
Investors often intend to buy stocks during dips but hesitate when presented with the opportunity. Share-price declines typically correlate with underlying issues. Alphabet’s stock dip from $155 to $136 partly resulted from Gemini’s flawed rollout. Despite concerns, Alphabet’s CEO assures us that there will be ongoing efforts to address these issues.
While Alphabet may not dominate immediately, its stock trades favorably. With a price-earnings ratio of 23-times, Alphabet remains attractively priced for a stock of its caliber.
— Chris MacDonald
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Source: Investor Place