Since January 2023, the market has exploded. As of March 18, the S&P 500 and Nasdaq Composite had risen 34% and 54%, respectively. The rally hasn't been widespread. Most of the weight is carried by the "Magnificent Seven" stocks, which contain some of the world's most powerful companies. And their market caps are rising.
This doesn't bar these stocks. Investors should focus on Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). This IT behemoth has the lowest projected price-to-earnings (P/E) ratio of the Magnificent Seven at 21.8.
Because it emphasizes net income, the forward P/E ratio may be better than a valuation multiple that uses sales. A positive bottom line is a great indicator of a company's economic responsibility. We can also analyze Wall Street's prognosis using forward estimates. So, consider adding Alphabet to your portfolio. It may make $100,000 into $1 million in 20 years.
Be mindful of the big picture Recently, Wall Street has criticized Alphabet for lagging behind in the AI wars, especially with Gemini's image-generation tool. Alphabet's revenue cow, Google Search, may yet be threatened by AI. Possible reason shares are cheaper than other Magnificent Seven stocks.
No worries, though. Investors should focus less on predicting or reacting to the newest news and more on the big-picture elements that affect a company's long-term success. Alphabet dominates regardless. Google Search earned $175 billion in 2023, up 7.7%. Despite all the excitement surrounding ChatGPT and its connection with Microsoft's Bing, StatCounter reports a staggering 92% global market share.
Alphabet can continue to target internet users better than any other platform thanks to its massive data collection (Google had 163 billion visitors in January). Alphabet will gain from high demand and ad prices. No clear evidence suggests Alphabet's crown gem is threatened. As tech advances, the company's network-based economic moat will protect it.
Bets on tenfold gains Alphabet stock has increased roughly 900% in 13 years. If shares rose tenfold in 20 years, they would gain 12.2% annually. I think that's fair. The valuation may rise, giving investors further upside. Even if the multiple is unimportant, the business has good growth possibilities. Internet data and users expand annually. This allows Google Search to arrange and display that data.
YouTube, the main video streaming site, is owned by Alphabet. It has 2.5 billion users worldwide and the highest TV viewing time of any streaming platform. More ads will flow to streamed material as more people watch it.
Google Cloud owns 11% of the global cloud computing market. Revenue grew 26% in Q4, faster than the business. Sales gains can continue due to the large runway for IT spending to move off-premises.Alphabet should see long-term sales and earnings growth from these sources, boosting stock returns.
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