Google parent company, Alphabet Inc. (NASDAQ: GOOGL), is now the third U.S. company to break $1 trillion in market capitalization on the stock market. The company comes in at third place, just behind Microsoft Corp. at $1.27 trillion, and Apple Inc. at $1.38 trillion.
Investors are bullish on the stock this year, and there could be more growth ahead if confidence continues.
What’s Driving Confidence in the Stock?
Alphabet’s core business is its Google products. Google’s advertising revenue generated 84% of the company’s total revenue in the previous fiscal quarter. With platforms like the Google search engine and YouTube, the company has consistently grown advertising revenue at a rate of 20% over the last ten years.
However, it’s the technology in the pipeline that has investors most excited. YouTube continues to make money for the company. It is the world’s largest video sharing platform and a competitor is yet to emerge. Alphabet is also investing in self-driving car technology and cloud computing services. As investors have seen with Microsoft and Amazon, cloud computing is a lucrative segment of the tech industry and it has the potential to bring significant revenue.
Google’s expertise in data centers should help it to create compelling cloud service models for small and medium-sized businesses, enterprises, and government entities.
The Phase One Trade Deal signed between China and the United States is also helping Alphabet to climb. President Trump signed a landmark agreement with Chinese representatives this week, ensuring that tariffs will be reduced, in exchange for China increasing its purchases of U.S. goods and services.
Google will have a marginal direct benefit, considering that its search engine and services are banned in China, but Alphabet’s stock will benefit from the overall increase in confidence that is currently sweeping financial markets.
Could the Stock Keep Rising?
Alphabet stock underperformed its peers in 2019, but performance in the first half of January has been impressive. Stock is currently up more than 8% for the year to date.
The average analyst target price of $1,505 suggests that there’s still room for growth. This target is reasonable considering the confidence that exists in the markets today.
Despite being a pricey stock, Alphabet could provide a strong return through its price growth. Investors who don’t have a stake in the company should consider buying while there’s momentum.
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