My top tech stock to buy in August (and it’s not even close)


It’s my top tech stock to buy in August. Alphabet (GOOGL -1.25%) (GOOG -1.00%). The advertising giant is weathering the macroeconomic storms relatively well and is trading at its lowest price in a decade.

Alphabet is home to some major business units, including Google Search and YouTube. Additionally, Alphabet serves a total market of approximately $800 billion. Let’s take a look at why Alphabet is my favorite tech stock for August.

Google and YouTube are the most popular among users.

Despite macroeconomic headwinds from high inflation, supply chain disruptions and Russia’s invasion of Ukraine, Alphabet’s revenue rose 13% in its fiscal second quarter, ended June 30. Sales rose to $40.7 billion in the quarter.

GOOG revenue (annual) data via YCharts.

Google is the number one search engine in the world with an estimated 83% market share worldwide. That level of dominance allows it to command a higher price than advertisers seeking popular positions for search queries. Since many purchasing decisions start with an internet search, this is a profitable business to capture. That may partly explain Alphabet’s revenue, which has risen from $66 billion in 2014 to $258 billion in 2021.

Another place where consumers can start their purchasing decision is on Alphabet’s YouTube. The streaming video platform, which has free and paid versions, boasts 1.5 billion monthly users. In the quarter that ended in June, YouTube generated $7.3 billion in revenue from advertising alone. With Google Search and YouTube, Alphabet will account for a significant portion of global ad spending, which will total $763 billion by 2021. Still, the sheer size of the market will keep Alphabet expanding for years without hitting its ceiling.

Alphabet’s revenue has increased from $16.5 billion in 2014 to $78.7 billion in 2021. Investors can reasonably expect Alphabet’s profits to grow further.

Alphabet stock is cheap.

GOOG price to free cash flow chart

GOOG price to free cash flow data by YCharts.

This stock is arguably cheaper than it has been in the past decade, with a price-to-value ratio of 20.5 and a price-to-free-cash-flow ratio of 22. Shares have become cheaper as investors worry about the negative impact of the macroeconomic environment. Head on Alphabet Business. Given last quarter’s results, those concerns seem like an overreaction.

Alphabet runs the dominant business in a large industry, selling at bargain prices. For those reasons, Alphabet is my favorite tech stock to buy in August.

Alphabet CEO Susan Frey is a member of The Motley Fool’s board of directors. Parkev Tatevosian has positions in Alphabet (C shares). The Motley Fool has positions and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy.





Source link

Related posts

Leave a Comment

1 + 8 =