- In recent weeks, Alphabet’s stock has underperformed amid antitrust issues, despite the digital advertising giant showing robust business performance.
- While antitrust concerns introduce greater uncertainty in the Alphabet story, current business and valuation realities render it a worthwhile long-term investment.
- With this note, I am upgrading Alphabet stock to a “Buy” once again. Read on to learn why.
- We are in an asset bubble, and I can help you navigate it profitably. At The Quantamental Investor, we pursue bold, active investing with proactive risk management Join Now
Introduction
Amid well-publicized antitrust issues, Alphabet Inc. (NASDAQ:GOOG)(NASDAQ:GOOGL) stock has recently diverged from broader equity indices and its big tech peers. So much so that Google stock is now underperforming the S&P-500 (SPY) and Nasdaq-100 (QQQ) on a year-to-date basis after having outperformed significantly during the first half of 2024:
Given Alphabet’s robust business performance in Q2 2024 – revenue growth re-accelerating to +14% y/y, operating margins expanding by 300 bps y/y to 32%, and diluted EPS jumping +31% y/y – I think it is natural for market participants to ascribe GOOGL’s lack of participation in the broad market bounce off of early-August lows to its recent loss in the “Search” monopoly antitrust case and the kick-off of a second antitrust lawsuit [centered around Alphabet’s ad-tech business] last week.
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