Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) is a behemoth tech company and after the fourth-quarter selloff, investors are wondering if now is the time to buy Google stock. Let’s explore a few reasons why it may be time to pull the trigger.
Balance Sheet
Let’s start with its balance sheet, quietly one of Alphabet’s top assets. While some companies like Apple (NASDAQ:AAPL) have opted to buyback loads of its own stock, Alphabet has let its cash hoard grow and grow. As of last quarter, it has about $106 billion in cash and short-term investments and just under $4 billion in long-term debt.
In other words, Alphabet is sitting on a $100 billion pile of cash. This gives the company staying power in a recession, as well as flexibility to invest in itself or via M&A.
Google Stock Has Assets
Let’s not forget the company’s assets either. Alphabet owns the world’s most popular website, Google.com, as well as the second most-popular website in YouTube.com. Owning those two properties in the internet world is like owning Park Place and Boardwalk in Monopoly.
However, its investments have paid off too. For instance, its self-driving car unit Waymo was valued as high as $175 billion. It owns Android, the most popular smartphone operating system in the world. Its collection of Google assets, Google Drive (think Docs), Gmail, Maps, Chrome, etc., have more than a billion users each.
Growth, Valuation and Google Stock
This next part is a two-part catalyst: Growth and valuation.
For 2018, analysts are calling for sales growth of 23% to $136.5 billion. That goes along with 29.6% earnings growth, with estimates calling for earnings per share of $41.80. In 2019, analysts expect 19% revenue growth to $162.8 billion and earnings growth of 13%.
These are solid numbers from a company this big, with Alphabet toting a market cap of $750 billion.
That said, some investors may balk at its valuation of 25 times earnings. But why? Investors continuously buy shares of Procter & Gamble (NYSE:PG), Walmart (NYSE:WMT), Clorox (NYSE:CLX) and others with P/E ratios near or north of 20 because they’re “safe” plays. That’s despite sluggish growth and pressured margins too.
I don’t have a problem paying 25 times earnings for GOOGL, a blue-chip technology company with the internet’s best assets, strong growth and a rock-solid balance sheet.
Trading GOOGL Stock
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There are a lot of common-sense reasons to like Google stock, but what do the charts say? Fortunately, investors can still get Alphabet stock at a good price today.
As we have laid out at least a dozen times here on InvestorPlace, GOOGL stock remains a strong buy at the $1,000 level. Since hitting this mark in December, we’re only $85 per share off that level. If investors are debating a long-term position in Alphabet, I wouldn’t hesitate to initiate a position on a slight pullback here. That’s even with earnings coming up in early February.
Shares are riding short-term uptrend support higher (black line) and are back above the 50-day moving average. Remember, GOOGL stock has a 52-week high near $1,300.
The way the stock is bouncing between $1,200 and $1,000 does make me a little hesitant (green and red circles). That said, this is a long-term winner and I do not bet against GOOGL over the long-term.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AAPL and GOOGL.
