Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), parent company of Google, is firing on all cylinders. But I can see why you may be looking to take profit with GOOG stock. After its strong performance so far this year (up 69%), you may feel that it’s time to take some risk off the table.
The question is, should you? Not so fast. Selling now would be short-sighted. Even as uncertainties loom over the stock market, heading for the hills is not the best move. Instead, holding onto your position, or entering a long-term position today, is your better option.
This is not only due to its high quality. There may be some concern now that its growth will slow down in the years ahead. But there’s plenty to suggest this won’t be the case. To top it all off, it’s reasonably priced compared to its long-term prospects, as well as compared to other FAANG (Meta Platforms (NASDAQ:FB), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX), and Google) components.
With the latest bit of volatility in the markets, shares may continue to pull back slightly. Yet don’t take this as a warning to steer clear. Over the long-haul, GOOG will likely deliver solid returns and hit new highs.
The Latest with GOOG Stock
In the month following its strong quarterly earnings report on Oct. 26, Alphabet shares continued to perform well. On Nov. 19, shares cracked the $3,000 per share mark for the first time. But with the most recent round of fear, uncertainty, and doubt that’s hitting the markets, shares in the big tech powerhouse have slid back.
As of this writing, GOOG stock is recovering. Yet many holding shares in their portfolio may be contemplating selling into strength. Investors who don’t own it yet may be thinking they should wait for another drop before entering a position. In this article, I’m going to dwell on the market and where it may be headed in the short-term.
What I will say is that it’s a fool’s errand to try and time the market. Put simply, trying to predict its next move is easier said than done. Worse yet, all the energy and time spent guessing can often result in little to show for it.
Now, I don’t mean you need to make every stock in your portfolio a long-term position. As company-specific factors change, you’ll know when it’s time to tell. With Alphabet though, that’s currently not the case. Its underlying business remains strong. It also appears set to stay that way for the foreseeable future.
Alphabet: A High-Quality Growth Stock
When talking about GOOG stock, “quality” is a term that first comes to mind. That’s clear based on its high profit margins (29.5%), high, consistent cash flow ($89.4 billion over the past 12 months), and rock-solid balance sheet (with $142 billion in cash on hand).
Sure, you may be thinking that high quality/blue chip status means below-average growth lies ahead. And after seeing its revenue/earnings rebound following 2020’s Covid-related impact to its advertising business, sales, and earnings, sell-side projections expect growth will slow down in 2022. However, based upon how it has handily beaten estimates several quarters in a row, results could continue to come in ahead of expectations.
Per recent commentary from Morgan Stanley’s Brian Nowak, digital ad innovation could enable its main business to deliver above-average results in 2022. What about its Google Cloud unit? It grew revenue 45% year-over-year last quarter, and its narrowing losses may point to it getting closer to profitability. Looking further into the future, Alphabet has ample opportunity for growth via its “Other Bets.” Besides Waymo, its autonomous vehicle (AV) division, the company is working on scores of other early-stage projects. These include projects in augmented reality (AR), virtual reality (VR), and other areas that are just starting to take off.
Commentators have been critical of these so-called “moonshot” projects. So far, they’ve yet to pay off. Even so, the investments it is making today in these emerging industries could see their respective payoff moments down the road. In turn, this would enable the company, despite a market capitalization nearing $2 trillion, to continue growing at a healthy clip.
The Verdict on GOOG Stock
Although market volatility may have you concerned, now is not the time to take the money and run with Alphabet. With its strong stock price performance throughout 2021, you may worry that returns from here may come in more gradually. Or worse, shares will experience a sharper price slide.
Even so, there’s no need to cash out or stay away. Reasonably priced at 26.4x this year’s projected earnings, it’s less vulnerable to a possible market-wide valuation reassessment. Furthermore, it stands to continue rising in value over time, in line with its earnings growth.
Coming in with a “B” rating in the Portfolio Grader, and with its strong chances to continue delivering above-average results, GOOG stock is still a name to buy and hold.
On the date of publication, Louis Navellier had a long position in GOOG. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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