• Alphabet (NASDAQ:GOOGL, GOOG) faces some headwinds in the form of persistent antitrust actions.
• But GOOGL stock remains a best-of-breed technology security.
• Diversified business segments and a huge cash pile make shares an attractive long-term buy.

Source: turbaliska / Shutterstock.com

With its 20-for-1 stock split on the horizon, is now a good time for investors to take a position in Google parent company Alphabet (NASDAQ:GOOGL)?

It’s a fair question to ask. Especially with GOOGL stock slumping as of late. After outperforming in 2021, shares are down 10% year to date at just over $2,600.

The slide has accelerated recently, with GOOGL stock falling 8% in just the past two weeks. While much of the decline can be attributed to broad weakness in the tech sector, there are a few internal issues that seem to be causing concern among analysts and investors.

Antitrust Fines Weigh on GOOGL Stock

One of the biggest issues for GOOGL stock investors is the company’s persistent political battles, many of which result in antitrust fines. Alphabet has run into particular trouble in Europe, where regulators have levied billions of dollars in fines against the company for what they claim is anticompetitive behavior.

In 2017, Alphabet was fined $2.8 billion, followed by a fine of $1.7 billion in 2019, and a fine of $5 billion that was levied only recently by the European Commission. Most of the fines stem from accusations of anticompetitive activity on the part of Alphabet when it comes to the company’s search engine and Android mobile operating system.

While Alphabet has deep pockets and is able to pay the record judgments against it, the legal trouble, which appears to have no end in sight, is grating on some investors. And the legal issues extend to Alphabet’s native land, where the U.S. Justice Department in 2020 joined forces with 38 state Attorneys General to file an antitrust lawsuit against Google’s internet search advertising business. That case is scheduled to go to trial in September 2023.

Perhaps more worrisome to investors than the hefty fines Alphabet has had to pay in recent years are the constant threats by regulators to break up the company. While much of the talk can be dismissed as political posturing, the idea of a forcible breakup of the company creates an air of uncertainty around Alphabet that is unwelcome.

Alphabet Still a Profit Machine

Despite some hand-wringing among investors and analysts, the antitrust lawsuits and fines have done nothing to slow down Alphabet. It remains a top-tier technology company and profit machine. Its 2021 operating profit amounted to $78.7 billion, giving the company an operating margin of 30.6%. Full-year revenue was $257.6 billion, up 41% from 2020.

Alphabet famously plows the money generated primarily from its online advertising business into a raft of new ventures that currently include a digital payments system, Pixel smartphones and tablets, and smart home devices. These new ventures have helped to diversify Alphabet’s business and make the company much more than its Google search engine.

Increasingly, Alphabet is also focusing on Google Cloud, which is currently the No. 3 public cloud provider after Microsoft (NASDAQ:MSFT) Azure and Amazon (NASDAQ:AMZN) Web Services (AWS). While Google Cloud remains unprofitable, it continues to grow and gain market share at a brisk clip. Revenue from Google Cloud was up 45% year over year in the fourth quarter of last year.

Alphabet also has a massive cash hoard. In fact, the company currently has the most net cash and short-term investment (net of debt) of any public company in the U.S. At the end of 2021, cash and short-term investments at Alphabet totaled $140 billion, while the company’s debt amounted to less than $15 billion. That huge cash pile should help shareholders sleep easy at night.

GOOGL Stock Sports a Low Valuation

In addition to the aforementioned positives, Alphabet’s Google is a market leader in all aspects of internet search, including its Chrome browser and Gmail. The company’s Android mobile operating system possesses nearly a 70% share of the worldwide market for mobile devices.

In the realm of online advertising, no other company comes close to Alphabet. The company’s share of total advertising dollars across the internet stood at 63% in 2021. It is forecast to reach 72% by 2025, growing to $785.1 billion annually in the process.

While GOOGL stock has struggled this year, shares have gained more than 200% over the past five years and around 760% in the past decade, trouncing the S&P 500’s gain of 214% over the same 10-year period.

What’s more, Alphabet’s stock currently trades at 22 times forward earnings, making it the second-cheapest mega-cap tech stock after Meta Platforms (NASDAQ:FB).

Buy GOOGL Stock

This year has been a tough one for most technology stocks. Alphabet has been no exception. But despite the short-term downturn in its share price, Alphabet remains a best-of-breed technology security that is a smart long-term investment.

The company remains a leader in most segments in which it competes, generates an unrivaled amount of advertising revenue and has an enviable cash pile. These factors, along with its growing diversification, make Alphabet a worthwhile addition to any portfolio. GOOGL stock is a buy.