Alphabet
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is better known as Google's parent company. The Google family of products is quite large, and it generates huge revenue from this family through ads. With ad revenue making up about three-quarters of Alphabet's total revenue in the second quarter, it's a critical part of the investment thesis.
Ad revenue rose 11% in Q2, which is solid growth considering how mature this business is. The profits from ads allow Alphabet to fund its AI research, which has created one of the best generative AI models available, Gemini. While this platform hasn't been monetized well yet, it has been integrated into several of Alphabet's ad products, which keeps it on top of the game for the best places to advertise.
Alphabet also has a thriving cloud computing business, Google Cloud. Cloud computing has seen an uptick in usage as companies look for ways to find computing power to train their AI models. Renting this computing power instead of outright buying it is a far less cash-intensive process, and it is a reason why Google Cloud is excelling.
Overall, Alphabet's revenue rose 14% in Q2, and earnings per share (EPS) rose 31%. These phenomenal results should give Alphabet a premium over the market. However, Alphabet is fairly cheap and trades for only 21 times forward earnings versus the S&P 500 index's 23 times forward earnings.
This is a significant value investing opportunity, making Alphabet a screaming buy.
No comments:
Post a Comment