Alphabet stock is over $100 again. Should I buy?

It hasn’t been a good year for parents Google and YouTube Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). The company announced that net income fell 21% last year, while revenue growth slowed dramatically.

In the fourth quarter, it was only 1% annually. Alphabet shares have been marked down 29% over the past 12 months.

But lately it has been on the rise. In the first week of the year I was able to buy shares at around $87 each, but now they are trading above $100 again. Could this be a sign that the company’s prospects are brightening, meaning I should buy now?

unique business

I think. Alphabet has many different businesses, but I still see Google as core to its long-term performance. And Google has been affected by some investor concerns.

A weak economy can cause advertisers to spend less, posting lower revenues and profits. Meanwhile, the rise of AI may mean that internet users no longer need to proactively search for content, boosting Google’s business entirely. Another risk is the growth of search functions on competing digital platforms, such as TikTok.

But perhaps investors have focused too much on the threats facing Google rather than the opportunities. The success of TikTok coincides with new ideas on YouTube, such as short content. So far, AI doesn’t seem advanced enough to pose a threat to Google. But seeing as Google is a serial innovator itself, it has an opportunity to turn AI to its advantage rather than its detriment.

Alphabet has a unique business, with a large customer base and a variety of tools to help them stay loyal. It is actually hardwired into the daily lives of many people and businesses. Even if they are willing to make an effort to switch providers, in many cases there are no equally good alternative products available.

The business model brings huge profits. Despite last year’s slumping net income, Alphabet still earned over a billion dollars a week, on average.

I have bought shares

Although Alphabet stock has moved up recently, I still see the price as cheap for a company of this quality.

A market capitalization of $1.3tn means the company is trading at a price-to-earnings ratio of 22. But I expect earnings to grow significantly over the next few years. Although last year was disappointing, Alphabet has proven its ability to grow consistently and I think it will be a profit engine in the future.

I took advantage of Alphabet’s lower stock price to build the company this year. To ensure my portfolio stays diversified, I don’t plan to buy any more shares in the tech giant right now.

But if I don’t have stocks and have spare cash to invest, I’ll be scooping up Alphabet like it’s going out of fashion (which, to some extent, already is).