Is Alphabet Stock a Good Investment Opportunity?

The trajectory of Alphabet’s (NASDAQ: GOOGL) (NASDAQ: GOOG) shares has been turbulent over the last three months, experiencing fluctuations before rising approximately 11% in 2024. Recent weeks have seen increased investor interest, driving the stock amidst positive sentiment about its prospects. Some may hesitate to include Alphabet in their investment portfolio despite reaching record highs. However, it’s essential to approach this with fresh eyes and consider its potential over the coming years.

Popular Products and Services

Alphabet owns and operates some of the most widely used digital services on the face of the planet. CEO Sundar Pichai summed up this dominance when he commented in the Q2 2023 earnings press release: “With fifteen products that each serve half a billion people, and six that serve over two billion each, we have so many opportunities to deliver on our mission.”

Google Search, for instance, commands a staggering 91% of the global market share, contributing 57% of the company’s total sales last year. 

Alongside these, Chrome (web browser), Android (mobile operating system), and Gmail (email service) lead their respective product categories on a global scale. Beyond these renowned internet properties that cement Alphabet’s position as a leading tech powerhouse, other noteworthy value drivers demand attention.

YouTube, which the company acquired for $1.7 billion in 2006, generated $31.5 billion in sales in 2023. This makes it arguably one of the most successful acquisitions in corporate history. According to data from Nielsen, YouTube attracts the most TV viewing time of any streaming service in the U.S., even more than Netflix. And it benefits from powerful network effects.

 Potential Growth and Valuation

Even with Alphabet shares near all-time highs, investors should find the current valuation reasonable. The stock trades at a forward price-to-earnings ratio of 22.8. That represents a slight premium to the S&P 500.

Given the compelling valuation, investors are getting a business that is poised to continue posting solid growth. According to Wall Street consensus analyst estimates, Alphabet is set to increase revenue and earnings per share by 10.6% and 15.9%, respectively, over the next three years. Should the valuation multiple remain stable, which is a probable scenario, shareholders stand to benefit significantly. Furthermore, Grand View Research estimates that the cloud computing market will be worth nearly $1.6 trillion by 2030. With Google Cloud, Alphabet has a formidable opponent in the industry. This segment has attracted well-known customers like Wendy’s, Bloomberg, and PayPal. Thus, adding Alphabet to one’s portfolio today appears to be a prudent financial decision.