Hold Alphabet Shares for Cloud, Not for Search Engine

Stocks to buy

What prompts people to buy and hold shares of Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)? Oftentimes, they own GOOG stock simply because Alphabet is the parent company of ultra-popular search engine Google.

Source: Benny Marty / Shutterstock.com

Yet, Google’s popularity isn’t the only reason to maintain a stake in Alphabet. That’s because the shareholders also get exposure to artificial intelligence (AI) and cloud computing technology.

As we’ll see, value investors also have a major incentive to own GOOG stock. Even though Alphabet is a tech business, its shares are cheaper than you might think they are.

Furthermore, Alphabet is an unexpected environmental, social and governance (ESG) investment. All in all, you’ll find that Alphabet is a multifaceted company, and a business worth your investment capital for the long term.

A Closer Look at GOOG Stock

As strange as it might sound, GOOG stock is both expensive and cheap at the same time.

On one hand, the stock is pricey as it broke above the $2,000 mark this year, and is now threatening to hit $3,000.

On the other hand, GOOG stock hasn’t made much progress since early September. It’s in a consolidation period, so the stock might be “basing” for another leg up.

Here’s the real kicker, though. Some folks might think that all technology stocks are overpriced, but that’s really not the case.

Consider this: Alphabet’s trailing 12-month price-to-earnings ratio is 28.41. Which implies that GOOG stock is actually trading at a very reasonable valuation.

So, $3,000 should be an easy price target to reach, and might just be a stepping stone on the path to $4,000 and beyond.

Google Slips to Second Place

Times are really changing in the tech world.

Believe it or not, Google isn’t the world’s most popular website anymore. It was just dethroned by a site/platform which many young people seem to enjoy.

New data reveals that TikTok has replaced Google as the number-one most visited website in the world.

Even Google’s entire portfolio combined — including Search, Maps, Translate, Photos, Flights, Books, News and more — couldn’t beat TikTok, which has more than a billion active users worldwide.

This might frustrate some Americans, as TikTok is owned by a Chinese company, ByteDance. Last year, I recall hearing rumors that TikTok posed a cybersecurity threat to the U.S., though I was unable to confirm this.

In any case, it’s possible that the emergence of the Covid-19 pandemic helped thrust TikTok into the number-one spot as people have spent more time indoors and on social media.

The Cleanest Cloud

Don’t get me wrong — Alphabet still makes plenty of money from Google.

In fact, during 2021’s third quarter, the “search and other” category generated $38 billion in revenues, compared to roughly $26 billion in 2020’s third quarter.

Still, it’s not a bad idea for Alphabet’s investors to consider the company’s other business segments. Among the most important ones is the cloud — and we can include this in the ESG category as well.

That’s because Alphabet operates the cleanest cloud in the industry (or at least, that’s what the company claims).

Many technology companies talk about becoming carbon neutral, but Google achieved this way back in 2007.

Not only that, but Google was the first major company to match 100% of its electricity consumption with renewable energy. The company has actually been doing this every year since 2017.

Today, Google/Alphabet is working toward achieving carbon-free energy 24/7 by 2030. With that objective in mind, the company continues to provide cloud infrastructure and tools to reduce the customers’ environmental impact.

The Bottom Line on GOOG Stock

Google is still a popular website, but it wasn’t destined to be number-one forever.

That’s perfectly fine, as there’s much more to Alphabet than just the Google search engine.

Perhaps you didn’t expect GOOG stock to represent an ESG investment or a value play. Alphabet is full of surprises, but don’t be surprised if the share price exceeds $3,000 and then $4,000 in the near future.

On the date of publication, David Moadel did not have (either directly or indirectly) any 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.

David Moadel has provided compelling content – and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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