Alphabet stock is above $100 again. I’d still buy!

Over the past year, shares in the parent Google Alphabet (NASDAQ: GOOG )(NASDAQ: GOOGL ) has lost a quarter of its value. Lately, however, Alphabet’s stock has been on the rise. From around $91 per share two weeks ago, the price has now risen to $104.

Even at that level, I think the company is a bargain for my portfolio. I expect the price to rise well above $100 in the coming year.

I have bought shares of Alphabet

Indeed, that’s why I raised my stake in Alphabet in the last few months when the stock was getting dumped. If I had the money to invest now, I would be happy to add more even at the current price.

Why am I so bullish on Alphabet?

In short, I see companies as hardwired into the daily lives of hundreds of millions or even billions of people. From ubiquitous search to mail services, cloud computing to YouTube, Alphabet has created a powerful position that competitors struggle to attack.

Not only that, but the ecosystem of products and services continuously enables huge profits.

One of the risks that Alphabet faces today is a decline in advertising that affects profits. I have evidence of the company’s performance last year. Annual revenue growth has slowed to just 1% in the fourth quarter, while full-year profits are down 21%.

However, even after a considerable fall, net income is still $60 billion. With a current market capitalization of $1.3trn, that means Alphabet trades at a price-to-earnings (P/E) ratio of about 22. If it can return to its 2021 earnings level, the prospective P/E ratio is just 18.

future prospects

But I think Alphabet stock might be worth less than that. I think the business can not only return to the former level of earnings but pass them, meaning that the P / E ratio of candidates is actually lower.

This may take a few years, but as a long-term investor, I’m in no rush.

Alphabet’s advantages are its large customer base, technological advantage, existing technical infrastructure and strong brand. The demand for the various digital services we provide is huge – and I expect it to grow over time.

But if the business looks promising, why is Alphabet stock a quarter below a year ago, even after the recent move up?

Some investors are concerned about what AI means for Google’s core search market, a key profit driver for Alphabet. Behind it is a greater risk. Alphabet competes in a fast-moving tech environment against a handful of deep-pocketed rivals who want to eat their lunch. The rise of TikTok may mean a decline in revenue and profit on YouTube, for example.

I see it as a risk – but also an opportunity. Alphabet has spent two decades beating the competition by improving its own offerings. I hope to continue to do so, I hope to generate higher profits in the future.