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Here's Why Google Parent Alphabet (GOOGL) Stock Looks Like a Buy

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Shares of Google parent Alphabet Inc. (GOOGL - Free Report) have popped since Christmas along with fellow FAANG giants Amazon (AMZN - Free Report) , Netflix (NFLX - Free Report) , and Facebook (FB - Free Report) . Despite this recent climb, GOOGL stock rests roughly 18% below its 52-week high and boasts some impressive growth projections.

Overview

Google became one of the world’s most valuable companies on the back of its search engine. Today, Google controls roughly 37.1% of the total U.S. digital advertising market, which tops second place Facebook’s 20.6%. Last quarter, Google’s ad business surged roughly 20% to hit $28.95 billion.

Alphabet’s other divisions have also helped boost the company’s overall revenues recently. The firm’s Pixel smartphones currently compete against Apple (AAPL - Free Report) and other smartphone makers. Plus, Google’s new Home Hub has gained steam in the larger home assistant market, driven by the rise of Amazon Alexa-supported devices.

In fact, “Google other revenues,” which includes the Google Play Store, Google’s Cloud offerings, and its hardware business, saw its revenues jump by $1.05 billion, or over 29% to touch $4.64 billion last quarter. Meanwhile, Google’s “other bets” segment climbed roughly 25% to $146 million. This business features its self-driving car segment Waymo, among other future-looking divisions.

Despite Google’s growth and outsized influence on our digital age, the company’s stock price has fallen roughly 6% over the last year, which includes its 8% post-Christmas climb. GOOGL stock also dip 1.33% Friday to $1,064.47 per share. This marks a roughly 18% downturn from its 52-week high of $1,063.59.

Outlook & Earnings Trends

Looking ahead, Alphabet is expected to see its fourth-quarter 2018 revenues jump 20.8% to reach $31.26 billion, based on our current Zacks Consensus Estimate. Meanwhile, the company’s fiscal 2019 revenues are projected to climb 20.4% above our current year estimate to reach $131.85 billion.

At the bottom end of the income statement, GOOGL is projected to see its adjusted Q4 earnings jump 14% to hit $11.06 a share. Meanwhile, the company’s full-year 2018 earnings are expected to surge over 31%. Peeking ahead to the following year, Alphabet’s adjusted fiscal 2019 earnings are projected to climb nearly 13% above our 2018 estimate.

Investors should also note that GOOGL has earned some positive earnings estimate revisions for Q4, as well as for fiscal 2018 and 2019 over the last 30 days. This means at least some analysts are more optimistic about the search engine giant than they were when the quarter got underway.

Bottom Line

Alphabet is a Zacks Rank #2 (Buy) at the moment based, in large part, on its recent earnings estimate revisions activity. Plus, the tech giant’s stock rests 18% below its 52-week high.

Going forward, it seems hard to imagine Google relinquishing much of its digital ad dominance, despite Amazon’s emergence as on online advertising power. Google, Facebook, and Amazon will also likely become even more attractive as Netflix and other non-ad supported firms steal more people away from linear TV.

Plus, the company’s other bets division could end up bearing fruit at some point over the next decade. We should remember that Google has faced criticism for its massive control over the flow of information, and government intervention is always a possibility—no matter how unlikely it truly is.

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