Alphabet's stock fell 12.5% after Nasdaq dropped more than 10%, presenting buying opportunity.

From Nasdaq: 2024-08-07 04:30:00

The Nasdaq Composite index has been performing well with gains of over 18% in the past year due to the rally in technology stocks, fueled by AI. However, a recent pullback of more than 10% has caused Alphabet’s stock to fall by 12.5%, presenting a potential opportunity for investors.

Alphabet’s recent earnings report showed a 15% increase in revenue to $84.7 billion. Adjusted earnings also rose by 31% to $1.89 per share, driven by a 3% increase in operating margin. Despite beating analyst expectations, aggressive capital spending by Alphabet has raised concerns among investors.

Alphabet’s increased capital investments aim to support the growth of its AI products and services. However, investors may have been expecting stronger growth considering the company’s significant capital spending. Nonetheless, Google Cloud revenue is growing faster than the company’s overall revenue, reflecting the positive impact of AI integration.

The integration of AI tools in Alphabet’s advertising business has also contributed to growth, with Google Advertising revenue up 11% year over year. The company’s focus on AI-driven features for advertisers has led to improved ad views quality, conversion rates, and profitability. This strategic move aligns with the expected rise of AI-enabled advertising.

Alphabet’s AI focus in the cloud and advertising markets positions the company well for future growth. Analysts anticipate a 32% increase in earnings for 2024, providing potential for long-term gains. With a trailing earnings multiple of 24 compared to Nasdaq-100’s 31, Alphabet stock is currently attractively priced for investors seeking exposure to the AI market.



Read more at Nasdaq: 1 No-Brainer Artificial Intelligence (AI) Stock to Buy Following the Nasdaq’s Recent Drop