In light of the recent economic uncertainty and the ongoing trade war with China, it’s hard to get most analysts on the same page regarding any stock. But many analysts seemed to be in agreement with it comes to Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) stock.
34 analysts currently cover GOOGL stock and 29 of them give the company a buy rating. The other five give Alphabet stock a hold rating and the average price target is $1,389.55. That represents a potential upside of more than 18%.
There’s a reason why analysts are so bullish when it comes to Alphabet stock. The company’s shares have done well in 2019 and are currently up 12% year over year. And Google continues to exceed investor expectations when it comes to revenue and earnings.
The company has dealt with its share of headwinds, including an antitrust investigation by the U.S. Department of Justice. And President Donald Trump has repeatedly accused the company of being antitrust and recently said Google manipulated votes during the 2016 election.
Let’s look at three reasons why most analysts are bullish when it comes to GOOGL stock — and why you should be, too.
Alphabet Generates Quite a Bit of Free Cash Flow
Investors are always looking for businesses that can generate a lot of free cash flow. And over the past year, Alphabet has replaced Apple (NASDAQ:AAPL) in this arena.
The company’s free cash flow has increased by nearly $20 billion since the end of 2017 to reach $117 billion. This is a year-over-year increase of 44%, which outpaces the industry average of 1%. Alphabet uses that money to invest aggressively in new products and opportunities.
The Company Continues to Invest in New Ventures
Google’s reach is already massive but Alphabet continues to invest more money into the company. The company continues to find new ways to invest in growth and opportunities outside of its advertising revenue. This is good news for GOOGL stock investors since the company derives 80% of its revenue from advertising.
And the company’s revenue from other products and services continue to grow. During the second quarter, revenue from Google’s cloud business grew by 40%. This is by far its largest revenue driver outside of advertising. Alphabet has also invested in new devices, gaming products, and equity in a number of startups.
Alphabet Stock Returns Quite a Bit of Money to Shareholders
In the past, Alphabet’s large cash reserves have been a sore subject because it meant the company returns less money to its shareholders. But then in June, GOOGL stock shot up after the company announced it authorized a $25 billion stock repurchasing plan.
This means the company can return a lot of money to its investors. And considering how much Alphabet continues to grow, investors in GOOGL stock will likely see huge gains in the coming years.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned stocks.
