Alphabet Inc. (GOOGL), the parent company of Google, has made remarkable advancements in the field of artificial intelligence (AI). Given the recent positive developments and the stock’s upward trajectory, it’s worth examining whether Alphabet presents a potential buying opportunity this week. Let’s explore further.

Alphabet, with its extensive resources and cutting-edge research, has firmly established itself as a leader in the ever-expanding AI landscape. The company’s strategic initiatives and recent progress in AI technology position it favorably to leverage the transformative potential of this field.

Furthermore, GOOGL’s stock has been trading above its 50-day and 200-day moving averages, indicating an upward trend. This positive momentum suggests that the stock may be an attractive buy this week.

The global AI market is projected to reach a staggering $2.03 trillion by 2030, growing at a CAGR of 21.6% according to Fortune Business Insights. As a renowned tech giant known for its innovation, GOOGL is well positioned to capitalize on the vast opportunities presented by AI, pushing the boundaries of what is possible.

Over the past three years, GOOGL has experienced impressive financial growth, with a 19.5% CAGR in revenue. Additionally, the company’s EBIT and EBITDA have shown significant increases with CAGRs of 25.9% and 21.9% respectively during the same period.

Year-to-date, GOOGL shares have gained 41.2%, outperforming the broader market. Closing the last trading session at $123.67, the stock has demonstrated positive price momentum.

Now, let’s examine recent positive developments that could impact GOOGL’s performance in the near term.

Positive Recent Developments:

On May 25, 2023, GOOGL introduced Search Labs, a program that grants users access to early AI-powered experiments such as SGE, Code Tips, and Add to Sheets in the United States. This new generative AI-powered Search experience aims to enhance search efficiency, provide diverse perspectives and insights, and simplify various tasks.

Moreover, on May 23, GOOGL’s Waymo announced a strategic partnership with Uber Technologies, Inc. (UBER). This collaboration aims to make Waymo’s autonomous driving technology available to users through the Uber platform. Starting in Phoenix, Waymo vehicles will be accessible for ride-hailing trips and local deliveries via the Uber and Uber Eats apps.

The partnership aims to offer a safe and fully autonomous experience, leveraging Waymo’s technology with Uber’s global marketplace.

Additionally, on May 18, GOOGL unveiled the private preview of Duet AI for Google Cloud. This always-on AI collaborator, powered by generative AI, offers real-time code suggestions, chat assistance, and customizable features tailored to enterprise requirements.

Strong Financial Performance:

In the first quarter of 2023, GOOGL’s revenues increased by 2.6% year-over-year, reaching $69.79 billion. Google services revenue slightly rose to $61.47 billion, while Google cloud revenue grew by 28.1% to $7.45 billion compared to the same period last year.

Furthermore, GOOGL’s cash and cash equivalents at the end of the period amounted to $25.92 billion, reflecting growth compared to the previous year’s quarter.

Optimistic Analyst Estimates:

Analysts anticipate GOOGL’s revenue and EPS for the second fiscal quarter ending in June 2023 to increase by 4.2% and 9.6% year-over-year, reaching $72.59 billion and $1.33 respectively.

For the current fiscal year ending in December 2023, the consensus revenue estimate stands at $299.49 billion, representing a 5.8% year-over-year rise. The consensus EPS estimate is $5.33, indicating a 16.9% increase compared to the previous year.

Strong Profitability:

GOOGL boasts a trailing-12-month net income margin of 20.58%, which is significantly higher (632.3%) than the industry Average of 2.81%. The company’s trailing-12-month levered FCF margin of 19.63% also outperforms the industry average by 166.5%.

Moreover, GOOGL’s trailing-12-month ROCE, ROTC, and ROTA of 22.76%, 15.74%, and 15.86% respectively, surpass industry averages.

Discounted Valuation:

GOOGL is currently trading at a forward non-GAAP P/E ratio of 23.37x, which is 10.9% lower than its five-year average of 26.22x. The forward EV/EBITDA multiple of 12.91 is also 5.8% lower than the five-year average of 13.71.

Furthermore, the stock’s forward P/S multiple of 5.28 is 6.5% lower than its five-year average of 5.65.

POWR Ratings Reflect Strength:

In our POWR Ratings system, GOOGL has an overall rating of B, which translates to a Buy. The rating takes into account 118 different factors, each appropriately weighted.

GOOGL receives an A grade for Sentiment, aligning with Optimistic Analyst Estimates, and a B grade for Quality due to its higher-than-industry profit margins.

My Conclusion

Alphabet Inc. (GOOGL) continues to demonstrate its commitment to AI technology through recent advancements and strategic initiatives. With its robust financial performance, profitability metrics, and discounted valuation compared to historical averages, GOOGL appears to be an attractive investment option this week.

It’s important to conduct thorough research and consider factors beyond this analysis before making any investment decisions.

Note: While GOOGL has a B rating in our POWR Ratings system, investors may also want to explore industry peers with A (Strong Buy) and B (Buy) ratings such as trivago N.V. (TRVG), Travelzoo (TZOO), Opera Limited (PRA), and Yelp Inc. (YELP).

Disclaimer: The article above is for informational purposes only and should not be construed as investment advice.