ALPHABET Inc. ( Google ) - Fundamental Analysis - Next target

15 בספט׳ 2021

Investors are probably already familiar with FAANG stock, having seen how these five companies - Facebook, Amazon, Apple, Netflix, and Alphabet - led the Nasdaq Index to all-time highs over the past decade. The importance of these five tech companies cannot be exaggerated, and even through the pandemic, the FAANG five contributed to the tech index reaching new all-time highs.

But if there is one among these five companies whose stock is worth thinking about buying today, it is Alphabet. Originally known as Google, or the "G" in the FAANG acronym, the company altered its name six years ago to show it was far from a conventional business. Even though Google is still a major part of Alphabet, the company is made up of many diverse businesses that explore various technologies and industries.

All of the above, as well as the fact that Alphabet's performance is excellent, is a good reason not to hesitate to buy shares in this Internet giant.

Alphabet's financial results are impressive, which illustrates why the company's stock has nearly doubled in the last year alone. Revenue was $90.3 billion in 2016 and more than doubled to $182.5 billion by 2020, while net income rose from $19.5 billion to $40.3 billion in the same period. What's more, capital spending has remained fairly constant even as operating cash flow has increased, resulting in the company's free cash flow growth over the past few years.

The company has shown that it can still grow quickly, with revenues in the second quarter of fiscal 2021 up 62% year over year. Increased technology adoption and digitalization have been important contributing factors to this growth, but Alphabet was already on a consecutive growth path before the pandemic began. Net income for the quarter more than doubled from the previous year to $18.5 billion, and the company's semiannual net income of $36.5 billion already exceeded net income for all of 2019.

The great thing about Alphabet is not just its financial performance, but how the company is committed to improving everyone's lives in so many ways. The pandemic showed just how innovative the company has been, as Google teams launched more than 200 new products and features. Google Maps added a COVID-19 layer displaying case information to help people plan their routes, and Google Meet, the company's video conferencing software, became free to anyone with a Gmail account.

CEO Sundar Pichai suggested a look at new products and systems during the company's latest earnings conference call. A new artificial intelligence system called Lambda with natural communication features will help make communication and computing more accessible to everyone. The upcoming 12th version of Android is designed to improve speed and energy efficiency as well as personalize devices. YouTube Shorts, a short video format similar to the popular TikTok, has been introduced in more than 100 countries and has garnered more than 15 billion daily views.

Alphabet is also investing $10 billion over the next five years to strengthen cybersecurity, as it is now a critical area for many companies and governments. Don't forget that the tech giant also has a division called Other Bets, which is making ambitious investments in new technologies such as self-driving cars and data analytics in healthcare.

This is just a snapshot of the loudest headlines in recent weeks about Alphabet's activities. It would take an entire book to cover everything.

Alphabet's culture is based on "moonshots" that help the company develop related or new technologies and turn them into mature, thriving businesses. In fact, the company is not interested in making only incremental changes to its products and services, but rather in seeking revolutionary changes that can take technology to the next level.

Thus, the company does not shy away from risky projects and encourages a culture of innovation that can lead to the discovery of disruptive technologies that can secure the future. That is what makes the future so exciting for the investor in Alphabet.

The great news is that the company still has a long growth streak in store. Digital ad spending, which last year accounted for nearly 29 percent of the U.S. market share of Google, is up 12.2 percent year over year in 2020 and shows signs of continuing growth.

Alphabet continues to invest in new technology and is steadily enhancing its cloud services, search engine, and other features. Given that the pandemic is a tailwind for technology adoption, investors should be confident that the company can continue to deliver results. The company's stock is relatively inexpensive, it trades at 26 times forward earnings, and the company will likely be able to deliver solid revenue and net income growth for years to come.