3 Great Reasons to Buy Alphabet While It’s on Sale

  • Alphabet (GOOG, GOOGL) has put investors through a lot of pain recently, but that just puts it at an attractive price.
  • GOOGL stock has plenty of cash, and the coming stock split could add to the excitement.
  • This looks like a great time to hop into Alphabet stock.
Alphabet Inc. (GOOG, GOOGL) and Google logos seen displayed on a smartphone

Source: IgorGolovniov / Shutterstock.com

When it comes down to the nuts and bolts, what is there really to say about Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) stock these days?

Arguably the most powerful tech company in the world, Alphabet is falling right along with the rest of the tech stocks this year as the market correction threatens to turn into a full-fledged bear market. GOOGL stock is down 28% so far this year, including a drop of 13% just in the last month.

If you like investing in big tech stocks, the drop has been downright painful. But really, it could be a lot worse.

GOOGL stock isn’t even the worst of the fabled FAANG stocks – FAANG being an acronym for the biggest tech growth stocks in the market. Netflix (NASDAQ:NFLX) is the worst of that batch, dropping nearly 70% so far in 2022.

Then there’s Meta Systems (NASDAQ:FB), which is down around 47% so far on the year. And Amazon.com (NASDAQ:AMZN) is sitting on a 38% loss.

Only Apple (NASDAQ:AAPL), which should have a huge year this year with the rollout of its new iPhone SE with 5G capabilities, is outperforming GOOGL stock right now, with only a 22% loss on the year.

Earnings for Alphabet’s first quarter were disappointing. Alphabet reported revenue of $68.01 billion, which was less than the $68.11 billion that analysts expected. Earnings per share also came in light, at $24.62 per share versus the $25.91 per share that the Street expected.

Revenue from Google Cloud was fine, at $5.82 billion versus analysts’ expectations of $5.76 billion. But revenue from YouTube really brought earnings down, as analysts expected  $7.51 billion and it could only manage $6.87 billion.

Chinese platform Tiktok is becoming a huge issue for YouTube. YouTube launched a product called Shorts to compete with TikTok, and said Shorts has more than 30 billion daily views at the end of the first quarter. That’s four times as many views as a year ago.

3 Reasons to Appreciate GOOGL Stock

So, there are challenges. But there are still three good reasons why I like GOOGL stock here.

Alphabet Stock Is on Sale. That’s right. Alphabet is a comparative bargain, and part of investing means to look for solid companies that are undervalued and buy accordingly. Alphabet has a long track record of being one of the best stocks in the market and nothing has changed fundamentally about the business to make it a loser.

It has a growing cloud business. It literally cornered the market on web searches in the U.S. with its Chrome browser, and it commands a lion’s share of advertising dollars. And it has a strong smartphone platform with its Android products.

The Stock Split. Stock splits are great for companies, and Alphabet is planning a 20-for-1 stock split for later this summer. The split means anyone who holds a single share of GOOGL stock will have it replaced with 20 shares.

That’s important because it makes the stock more available to retail investors. It’s a lot easier to do put options on a stock valued at less than $200 than it is when the stock is more than $2,000 — and the added liquidity doesn’t hurt. More people trading GOOGL stock means that the price has a better chance of going higher, particularly when market sentiment turns in favor of tech stocks again.

Google’s Cash Reserves. Alphabet had about $139 billion in cash on hand at the end of the year. That gives it the option to do pretty much anything it wants, including acquiring a new business. It could invest in a new product line to make money down the road. Or it could just sit on its cash, take advantage of higher interest rates, and see about a 4% increase in its earnings this year.

Any of those options are a great reason to like GOOGL stock at this point — even with the stock market pushing Alphabet lower.

The Bottom Line

Alphabet is literally on sale right now. Can you get it at a cheaper price if you wait a few weeks? Perhaps. But a year or two from now, you’ll be looking back and wishing that you had jumped on board GOOGL stock at these prices.

On the date of publication, Patrick Sanders had a long position in AAPL. He did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Patrick Sanders is a freelance writer and editor in Maryland, and from 2015 to 2019 was head of the investment advice section at U.S. News & World Report. Follow him on Twitter at @1patricksanders.


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