The Alphabet share price has doubled over 6 months… here’s why
The Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOGL) share price jumped in early Thursday (30 October) trading after the tech giantâs third-quarter results the day before had smashed expectations.
Revenue surged 16% year-on-year to $102.3bn â the first time Alphabet has crossed the $100bn quarterly mark â while net income climbed 33% to nearly $35bn. Earnings per share rose 35% to $2.87, well ahead of analyst forecasts of $2.27.
This is quite an astonishing beat for a mega-cap stock. Just remember, there were something in the region of 40 analysts forecasting this quarter. And their collection earnings projection was just so far under the reported figure.
CEO Sundar Pichai credited Alphabetâs âfull stack approach to AIâ, highlighting the rapid rollout of AI Overviews and AI Mode in Search, as well as Geminiâs 7bn-token-per-minute processing capacity.
Google Cloud remained a standout performer, growing 33.5% to $15.2bn and ending the quarter with a $155bn backlog.
But the broader business just looks so robust too. The company boasts over 300m paid subscriptions and momentum across all segments. This confidence has allowed it to raise its capital expenditure guidance to $91bnâ$93bn as the firm invests aggressively in artificial intelligence (AI) infrastructure.
Catalyst after catalyst
Back in April following Trumpâs Liberation Day tariffs, Alphabet appeared vastly undervalued â at least to me and many of my Motley Fool colleagues.
Back then, Edward Sheldon (among others including Ben McPoland and Cliff DâArcy) cited the companyâs highly appealing value proposition and relatively low risk profile. Ed even called it a âvalue tech stockâ, which was super accurate.
Also in April, I wrote that the price-to-earnings-to-growth (PEG) ratio of 1.1 represented a huge discount to the information technology sector average. Since then, the company’s experienced catalyst after catalyst.
Concerns over the US antitrust case and the rise of ChatGPT once weighed heavily on sentiment, particularly as investors questioned whether generative AI might erode Googleâs Search dominance.
Q2 earnings however, helped steady confidence. It showed ad revenue and a sharp rebound in operating margins as AI tools began enhancing, not undermining, core products.
There have also been impressive announcements related to its quantum programmes, spiking investor interest.
The stock’s gone on to almost double since April. In fact, given some currency fluctuations, those UK investors who bought the stock then may have seen a 100% return.
What about now?
On the face value, the stock now trades at 27 times forward earnings and has a PEG ratio of 1.8. However, the recent outperformance is yet to be taken into account. Iâd suggest itâs probably trading close to 24.5 times forward earnings and the PEG ratio will probably â if my calculations are correct â be closer to 1.5.
This is still a discount to the information technology sector average, and suggests the stock could push higher. There may also be a FOMO aspect to consider â Alphabet is a winner in AI, cloud technologies, search, autonomous driving, and even quantum computing.
However, some risks remain, including what AI may do to traditional search. An economic downturn, which isn’t off the cards, would also hurt ad spending.
Personally, I still believe Alphabet’s worth considering. Itâs now my largest holding, just.
The post The Alphabet share price has doubled over 6 months⦠hereâs why appeared first on The Motley Fool UK.
Should you invest £1,000 in Alphabet right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Alphabet made the list?
More reading
- Looking to beat the market? Quantum computing could lift Alphabet shares even higherâ¦
- The 3 largest dividend stock holdings in my rapidly-growing retirement portfolio areâ¦
- The 3 largest individual stock holdings in my rapidly-growing SIPP are Nvidia, Alphabet, andâ¦
- Robotaxis are coming to London! 2 S&P 500 shares to consider for an ISA
- Will AI stocks usher in a golden age of passive income?
James Fox has positions in Alphabet. The Motley Fool UK has recommended Alphabet. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
