7 Reasons to Buy Alphabet Inc (GOOGL) Stock Now

You can buy GOOGL stock at a discount.

Alphabet Inc (Nasdaq: GOOGL, GOOG) investors didn’t get the earnings report they were hoping for in February. Despite exceeding consensus earnings and revenue expectations, a combination of rising costs and falling advertising prices sent GOOGL stock price lower by more than 2 percent following the report. So far, investors are worried rising costs and falling prices will ultimately eat into Google’s growth numbers. However, Wall Street analysts say there are still plenty of reasons to buy GOOGL stock, especially if the market offers a discount. Here are seven reasons to buy GOOGL stock.

Alphabet’s business is booming.

Sure, there were red flags in the fourth-quarter earnings report. But earnings per share, revenue, cloud and hardware sales and traffic acquisition costs all came in better than analysts had anticipated in the fourth quarter. Investors may be worried about a 13 percent increase in traffic acquisition costs (TAC) compared to a year ago, but TAC as a percentage of total advertising revenue was 23 percent, in line with previous quarters. Total advertising revenue was up 20 percent. So while Google’s costs are on the rise, it’s business is growing fast enough to keep pace up to this point.

Google has dominant search share.

Wall Street legend Warren Buffett has said he always prefers companies with a durable competitive advantage over peers. Google’s search engine dominates the online search market, and its massive scale and technology advantages will make it difficult for other companies to threaten that position over time. According to NetMarketShare, GOOGL accounts for 78.2 percent of the world’s desktop search market and 79.4 percent of the mobile search market. Those numbers would be much better if Google weren’t banned in China, giving roughly 17 percent global mobile search market share to Chinese rival Baidu (BIDU).

Alphabet is the lowest-risk FANG stock.

The FANG stocks have led the Nasdaq composite higher during the past decade. However, Amazon.com (AMZN) and Netflix (NFLX) both have forward earnings multiples above 50, some of the highest valuations on the Nasdaq. Facebook (FB) has its own set of problems with abuse of its platform, potential government regulations and data security issues. A reasonable forward earnings multiple of 24.3 and relatively low headline risk make GOOGL’s stock price the safest bet of the group. Alphabet has never been a dividend stock, but its impressive cash flow growth suggests it could opt for a dividend at some point.

Google Cloud has an impressive growth trajectory.

Investors were disappointed that Alphabet didn’t explicitly disclose its Google Cloud revenue run rate in the fourth quarter, but management said cloud is “one of the fastest-growing businesses across Alphabet.” Other revenues segment growth, which includes Google Cloud, was 31 percent, and the company said it doubled its cloud deals in 2018. According to RightScale, GOOGL is a distant third in enterprise cloud adoption behind Amazon and Microsoft Corp. (MSFT). However, Garnter projects the global public cloud market will grow by 17.3 percent to $206.2 billion in 2019, creating plenty of opportunity for all the leading companies.

YouTube is a top-tier platform.

YouTube has capitalized on a fundamental shift in the way cord-cutters view video content. Any way you look at it, the YouTube numbers are impressive. The platform has 1.8 billion monthly users in 90 countries who watch more than 1 billion hours of content per day. Among the coveted advertising demographic of 18- to 24-year-old Americans, an estimated 96 percent of internet users use YouTube. Morgan Stanley estimates YouTube search was up 40 percent last quarter. Analyst Brian Nowak says YouTube will continue to expand its ad offerings and monetize a higher percentage of impressions over time.

Waymo is coming.

When investors think of Google, the auto industry is likely not the first thing that comes to mind. However, Google subsidiary Waymo is its autonomous vehicle business, and it could be worth much more than investors realize. Nowak says Waymo could ultimately reach a $175 billion market cap, more than the current market cap of Ford Motor Co. (F), General Motors Co. (GM) and Tesla (TSLA) combined. In mid-2018, Waymo announced it has logged 10 million driverless test miles on public roads. Uber, the closest competition, has driven only 3 million public test miles.

Alphabet has positive catalysts ahead.

There are plenty of reasons for long-term investors to be optimistic about Google’s prospects. However, Bank of America analyst Justin Post says there are also several near-term GOOGL stock catalysts coming in the first half of 2019. In the company’s fourth-quarter earnings call, management said new search formats could positively impact advertising growth. Bank of America’s checks suggest YouTube is gaining momentum and could have an even larger impact in coming quarters. The Google Cloud Next 2019 conference in April could shed some light on the cloud business. Finally, updates on Waymo and a potential spin-off could be positives.

The best reasons to buy GOOGL stock now.

Here are seven reasons why investors should buy GOOGL stock:

— Alphabet’s business is booming.

— Google has dominant search share.

— Alphabet is the lowest-risk FANG stock.

— Google Cloud has an impressive growth trajectory.

— YouTube is a top-tier platform.

— Waymo is coming.

— Alphabet has positive catalysts ahead.

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