Alphabet Stock Continues To Impress and Outperform as Other Tech Trembles

There’s a lot happening with Google parent company Alphabet (NASDAQ:GOOGL) that investors should be paying attention to. The raft of news coming from Alphabet has helped to keep GOOGL stock relatively buoyant at a time of extreme market volatility and a sharp downturn in tech stocks.

Alphabet Inc. (GOOG, GOOGL) and Google logos seen displayed on a smartphone
Source: IgorGolovniov / Shutterstock.com

So far this year, Alphabet’s share price is down 10% to $2,597.41 at Friday’s close. That compares to the benchmark tech-laden Nasdaq Composite index that has fallen 18.4% and into bear market territory at several points this year.

In fact, Alphabet has remained one of the most resilient of the mega-cap growth stocks as its peers, including Meta Platforms (NASDAQ:FB) and Netflix (NASDAQ:NFLX), each down more than 43% since the start of January.

Cybersecurity Buy

The most recent news of note to come from Alphabet is that the Mountain View, California-based company is acquiring cybersecurity firm Mandiant (NASDAQ:MNDT) for $5.4 billion as part of its efforts to better protect its cloud computing business.

The search engine giant said it will pay $23 a share for Mandiant, which has been in operation since 2004. Morningstar senior equity analyst Mark Cash called that price a “solid deal for shareholders.”

Once the deal is completed later this year, Mandiant will be integrated into Google’s cloud computing division. “We look forward to welcoming Mandiant to Google Cloud to further enhance our security operations suite and advisory services,” said Thomas Kurian, chief executive of Google Cloud, in a news release.

Mandiant, which has a market capitalization of $5.25 billion, was previously owned by cybersecurity firm FireEye before that brand was sold.

Cybersecurity stocks are back in vogue right now as concerns about cyberwarfare and the need to protect networks from hackers has intensified amid the geopolitical crisis in Ukraine.

Many analysts have been recommending cybersecurity stocks as risks of hacks and cybercrimes grows with Russian aggression abroad. The acquisition of Mandiant is also expected to help Alphabet grow its cloud computing business that competes against larger rivals such as Microsoft’s (NASDAQ:MSFT) Azure and Amazon’s (NASDAQ:AMZN) Web Services.

Stellar Earnings and Stock Split

Also helping to keep GOOGL stock afloat through the current market volatility has been a stellar fourth-quarter earnings report and news of a stock split.

The company reported revenue growth of 32% for the final quarter of 2021 and said that its advertising revenue came in at $61.24 billion for the quarter, up 33% from $46.2 billion in the same quarter a year ago.

The company’s cloud computing unit had revenue of $5.54 billion, up 45% from a year earlier. While Google’s cloud business remains unprofitable, its operating loss narrowed to $890 million during Q4 2021 from $1.14 billion during the same period of 2020. Alphabet’s share price popped 9% immediately after the earnings were released.

When unveiling the Q4 results, Alphabet also announced a 20-for-1 stock split that takes effect on July 15. News of the split, which many analysts had long called for, left investors cheering.

There is now speculation that the stock split, which would bring GOOGL stock down to about $135 a share based on current levels, will attract hordes of retail investors and could also lead to the stock being added to the Dow Jones Industrial Average, which is made up of 30 blue-chip companies. Changes to the Dow index are made on an “as needed basis” and can take place at any time, according to the rules governing the S&P Dow Jones Indices.

Inclusion in the DJIA would lead to more GOOGL shares being bought by exchange-traded funds (ETFs), mutual funds and institutional investors that track the index, which could further elevate Alphabet’s stock.

Buy and Hold GOOGL Stock

Alphabet’s earnings show that the company’s business is diversified and mature enough to weather the current inflationary environment, impending interest rate hikes, and market volatility.

The acquisition of cybersecurity firm Mandiant further diversifies and strengthens Alphabet’s operations, and the 20-for-1 stock split is positive news for investors.

When evaluating Alphabet’s stock, there is no real downside. It’s clear why the company’s shares outperformed most other tech stocks in 2021, rising 65% from January through the end of December.

Looking ahead, there’s plenty of reason to continue liking Alphabet and its business. GOOGL stock is a strong buy.

On the date of publication, Joel Baglole held long positions in GOOGL and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.


Article printed from InvestorPlace Media, https://investorplace.com/2022/03/alphabet-stock-continues-to-impress-and-outperform-as-other-tech-trembles/.

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