On September 2, Alphabet (GOOGL) announced that YouTube Music & Premium had reached 50 million subscribers. YouTube might be the greatest media M&A of all time, which, along with other Alphabet business segments, keeps me bullish on the company’s future.
Alphabet is an American multinational conglomerate, it is divided into many subsidiaries, such as Waymo, X, Nest, Calico, and the well-known Google, which includes Ads, Cloud, YouTube, Android, and Maps, among others. (See Alphabet stock charts on TipRanks)
YouTube revenue grew 84% year-over-year during Q2. YouTube Shorts, the new YouTube feature that imitates TikTok, surpassed 15 billion global daily views, up 131% from the 6.5 billion that it detailed in March.
According to a blog post from YouTube, its premium music service is the fastest growing music subscription service out there. Despite stealing market share from big players like Apple (AAPL) and Spotify (SPOT), YouTube music only accounts for 8% of the global music subscriber market share, according to MIDiA Research.
Alphabet has such a strong core business, which has seen outstanding growth in revenues during the last five years.
Other Alphabet segments, such as Google Cloud & Other Bets, are quite promising.
Regarding Google Cloud, it grew revenues by an impressive 54% during Q2, and it holds 9% of the Cloud industry market share, with only Amazon’s (AMZN) AWS and Microsoft’s (MSFT) Azure ahead, according to Statista.
Valuation, Future Growth
Alphabet is deemed to do very well in the future as it continues to grow its core business, Cloud, and Other bets. The company is trading at 29x 2022 EPS, slightly above its five-year average of 26x.
Nonetheless, Alphabet is a very well-known company, which is difficult to find at cheap prices, though other FAANG stocks are trading at similar or higher valuations.
Wall Street’s Take
According to Wall Street, Alphabet has a Strong Buy consensus rating, based on 29 Buys assigned in the past three months. At $3,192.61, the average Alphabet price target implies 11.9% upside potential.
Seeing companies like Alphabet authorize the repurchase of an additional $50 billion of its Class C shares, while holding $136 billion in cash, just proves that big tech is the new defensive sector.
Looking forward, Alphabet is likely one of the best tech stocks to own. Do not be fooled by its high market capitalization: three years ago no one believed we could have trillion-dollar companies, and we now have five.
Disclosure: Álvaro Romero holds a long position in GOOGL at the time of publication.
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