Alphabet (GOOGL) is my pick for the best technology stock to buy in August. The advertising behemoth is holding up well against macroeconomic calamities at its lowest price in nearly a decade.
Google Search and YouTube are among Google’s most important business areas. Furthermore, Alphabet has a market size of around $800 billion. Let’s have a look at why I like Alphabet as a technology stock in August.
Google and YouTube are extremely popular among consumers
Despite the economic headwinds caused by supply chain disruptions, rising inflation, and the Russian war with Ukraine, Alphabet’s revenue rose 13% in fiscal Q2, which ended June 30. The Google Search segment was responsible for most of the growth during the period, with sales increasing to $40.7 billion from $35.8 billion a year earlier.
Google is the world’s most popular search engine, with a global market share of about 83 percent. That degree of dominance allows it to charge advertisers more for prominent search results locations. Since many product purchases begin with an internet search, this has been a lucrative market to conquer. It may partly explain Google’s revenue growth from $66 billion in 2014 to $258 billion in 2021.
On YouTube, one of the first places customers may begin a purchase decision is owned by Google. The streaming video site with both free and paid variants has 1.5 billion monthly users. In the third quarter of this year, YouTube earned $7.3 billion in advertising revenue alone, according to Statista. Despite taking a commanding share of worldwide ad spending in 2021, Google Search and YouTube provide Alphabet plenty of breathing room for years to come.
Alphabet’s scale has resulted in an increase of operating income from $16.5 billion in 2014 to $78.7 billion by 2021. If it continues to develop at this rate, its revenue will rise at a compounded annual rate of 21.1% over the previous decade; investors may reasonably anticipate more Alphabet earnings growth.
Alphabet’s stock is cheap
The P/E ratio is around 20.5 at the moment, and free cash flow is 22. This stock appears to be very cheap by Alphabet’s earnings of 20.5 and free cash flow of 22, which is historically low. Because investors were concerned about macroeconomic headwinds harming Google’s business, shares have gotten cheaper. Given the recent quarter’s performance, those worries appear to be overblown.