Alphabet: Riding an Eight-Day Winning Streak with Strong Fundamentals – A Buy Opportunity?
Alphabet Inc. (NASDAQ: GOOG $Alphabet(GOOG)$ ) is making waves on Wall Street, currently trading at $162.97 with an eight-day winning streak—the longest since April 2019. The stock has surged 9.63% over this period, reflecting solid investor sentiment. As it approaches its highest close since August 2024, Alphabet’s upward momentum offers a compelling case for bullish investors.
Key Drivers Behind Alphabet’s Rally
The tech giant's performance isn't just a short-term win. With a year-to-date gain of 16.67%, Alphabet continues to show resilience in the market, despite being down 14.76% from its all-time high of $191.18 in July. This presents a buying opportunity, especially as the stock is up 25.12% from a year ago and 33.4% from its 52-week low.
Alphabet’s fundamentals also back up the recent price action. Over the last five years, the company has achieved compound earnings per share (EPS) growth of 23% annually, closely matching its 21% annualized share price gain. This alignment between EPS and stock performance suggests that investor sentiment is driven by strong, consistent earnings growth.
Strong Cloud and AI Growth as Catalysts
Alphabet's cloud business has been a standout, growing by 29% in the latest quarter to $10.3 billion in revenue. With AI becoming increasingly integral to the company's offerings, Google Cloud continues to fortify Alphabet’s competitive advantage. Moreover, Alphabet’s strategic focus on cost discipline has boosted operating margins to 31.6% from 25% in 2023, a sign of robust financial health.
The company’s revenue growth in other key areas also shines. YouTube, for instance, saw a 13% increase in ad revenue in Q2 2024, earning $8.7 billion. Search remains a core revenue driver, while Alphabet's massive investments in AI, genomics, and cutting-edge technologies like TPU6 chips are positioning it for future growth.
Alphabet’s Attractive Valuation
Despite its impressive performance, Alphabet trades at a relatively low price-to-earnings multiple of 18, making it one of the cheaper tech giants. Alphabet's balance sheet is another strength, boasting more cash than debt. With $23.6 billion in net income and a commitment to returning value to shareholders through dividends, Alphabet’s financial stability is hard to ignore.
Institutional investors are also bullish. In Q2 2024, 165 hedge funds held positions in Alphabet, reflecting confidence in the stock’s long-term potential.
Trading Levels
Conclusion: Buy Alphabet as It Continues to Rally
Alphabet’s combination of strong fundamentals, cloud and AI growth, and solid financial performance makes it an attractive buy. While the broader U.S. economy faces headwinds, Alphabet's diverse revenue streams and focus on innovation position it well to navigate uncertainty. With the stock riding an eight-day winning streak and trading at an appealing valuation, now could be an excellent time for investors to add Alphabet to their portfolios.
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