Investing Insights to Alphabet (Google) – Is This the Tech Stock Giant of 2021?
While blue-chip indices such as Nasdaq and the S&P 500 may feature some of the world’s most lucrative and profitable companies, they’re not immune to volatile movements or economic tumult.
This was borne out by recent movements, with the Nasdaq experiencing its worst single session since October against the backdrop of rising interest rates and wider economic uncertainty.
One of the leading companies on the Nasdaq index is Alphabet, which is the parent company of Internet search giant Google. We’ll explore this asset in a little more detail below, while asking whether or not this is the tech giant to invest in during 2021.
The Numbers Behind Google’s Immense Success
Since 2002, Google has experienced increasingly exponential revenue growth, which peaked at $181.69 billion at the end of 2020.
Of course, the rate of growth for Google has become more pronounced year-on-year, with the company recording revenues of $136.36 billion and $160.74 billion respectively in 2018 and 2019.
It’s this consistent growth that underpins Alphabet’s viability as a stock, with strong revenue and a sustainable record of profitability linked to incrementally rising share values.
So, while Nasdaq and US Tech 100 stocks often see their value increase at a disproportionate rate of earnings, Alphabet is one of the few companies of this type to justify such high value equity.
Why Did Google Fare so Well in 2020?
Interestingly, Alphabet and Google fared comparatively well in 2020, despite the immense socio-economic impact of the coronavirus.
There are several reasons for this, with one of the most obvious being Google’s dominance of its core market. More specifically, the company is renowned as an Internet search giant, and one that grew to claim an estimated 87.4% of the global search engine market share during 2020.
The firm has also built on this solid foundation by launching a diverse range of other products and services, many of which are affiliated and capable of generating traffic and profit in equal measure.
The best example is Google’s YouTube platform, while programs such as Google Maps, Google Cloud and the Google App Store also offer incredibly lucrative examples.
Of course, Google has also monetised key aspects of its search engine function, with Google Adwords embodying this better than anything else. This enables the platform to generate revenue through pay-per-click advertising, with this having increased in 2020 amid an ecommerce drive and forced changes in consumer behaviour.
Should You Invest in Alphabet This Year?
There’s no doubt that Alphabet and Google represent a sensible, low-risk investment option, particularly if you follow a dividend investment path that triggers the release of frequent and incremental payments over an extended period of time.
However, the share price is estimated at $2,015.95 at the time of writing, which may make it inaccessible for novice investors who are just starting out in the stock market.
In this case, you may want to consider trading Google as an individual stock through a CFD (contract for difference). This way, you can simply speculate on Google’s price movements within a predetermined period of time, without assuming ownership of the underlying asset.
You can also trade associated indices such as the US Tech 100 through this type of investment vehicle, with this offering greater exposure across the tech market and diversifying your portfolio instantly in the process.
This also allows for speculation and helps you to hedge your risk, while enabling you to profit even during times of market depreciation.