Alphabet Inc (GOOG, GOOGL) stock is quickly approaching all-time highs, now sporting a market capitalization over $520 billion. Given this incredible display of value for the Internet search giant, one might think that GOOGL stock lacks significant upside from this point forward. However, the price target on GOOGL just keeps going higher, with analysts almost universally suggesting that GOOGL stock is still a great stock to own.
During this last week alone, three reputable research firms reiterated or issued “Buy” ratings on GOOGL with price targets that imply big upside ahead. Morgan Stanley (MS), Bank of America Corp (BAC) and Deutsche Bank AG (USA) (DB) all told clients to buy GOOGL during the last few days, with price targets ranging from $945 to $1,080, an upside of 22% to 40%.
No other large company in the market is loved more than GOOGL, or has more expected upside from its current price. Of the 51 analysts who cover GOOGL, 48 have buy ratings, 18 have rated the stock strong buy, and only 3 have a hold rating. That means only 6% of analysts have a hold rating and no analyst believes that GOOGL is a bad investment.
What’s interesting is to compare this outlook to Apple Inc. (AAPL), a company that is larger with cheaper stock multiples. Of the 47 analysts that cover AAPL, 19% have a hold or lower rating on the stock. If we do the same experiment on Microsoft Corporation (MSFT), 42% of analysts have a hold or lower rating on the stock (15 of 35).
Follow the Crowd With GOOGL Stock?
In theory, every stock should have both buyers and sellers who create supply and demand for the noted stock. Yet, there is no more visible example of one-sided analysis among large companies than GOOGL, which is somewhat odd given that GOOGL stock trades at a rather steep, 19 times fiscal year 2017 expected earnings per share.
Nonetheless, there is that old saying that if everyone is running left in the market, smart investors run right. Yes, that is often true, but could it be that GOOGL is the exception?
When you consider that Alphabet dominates Internet search, has half a dozen top-20 mobile apps, owns more than 80% of smartphone operating system market share and is a video, email, maps, e-commerce, review and cloud juggernaut, then it is easy to see why the stock is so beloved. But in addition to these noted businesses, many of which are growing at 20% annually or more, Alphabet has a number of ongoing projects to drive the next chapter of growth and stock gains.
First and foremost, there is Google Fiber, broadband internet with far faster speeds and cheaper prices than anything else on the market (minus a few competitors). With Google bundling TV, internet, home phone and mobile service as a mobile virtual network operator, the company has a legitimate chance to disrupt and dominate a broadband market that consists of 100 million U.S. homes and $50 billion-plus in annual revenue.
Beyond that, Google is leading the way with self-driving technology, a $50 billion per year e-learning market with Chromebooks and related software and the potential to compete with the likes of Mastercard Inc (MA) as an actual payment processor later down the road.
Thus, when you consider all aspects of the Alphabet story, it’s no wonder that analysts are betting on GOOGL stock.
After all, who wants to bet against it?
As of this writing, Brian Nichols owns shares of Apple.
