The parent Google alphabet (NASDAQ:) is a star player this year.
A member of the FAANG group of stocks, made up of such notables as Apple (NASDAQ:) and Amazon.com (NASDAQ:), the movement in this digital advertising giant has been so strong this year that it has left many investors by surprise, especially as the pandemic-driven boom in the tech rally is showing some signs of peaking.
Shares of the Mountain View, California-based company are up about 40% this year, as investors take a break from other high-growth contenders. Google closed Monday at $2,402.30 and remains the top-performing name of the five megatech stocks.
Alphabet Weekly Chart
What is attracting investors to buy Google stock is a clear sign that it is coming out of the downturn caused by the pandemic much stronger, with a faster-than-expected recovery.
In the period ending March 31, Alphabet recorded a sales increase of 35% compared to the same period last year. In total, Alphabet generated $17.9 billion in net revenue, nearly doubling the amount in the same quarter of the previous year.
According to many analysts, this growth momentum will continue as consumers resume their trips to restaurants, shops and even vacation destinations – activities that drive web traffic and generate advertising revenue for Google.
More Upside
Barclays analysts in a recent note reiterated their call that Alphabet is one of their favorite names in the mega-cap tech space, noting that the outlook for its stock remains "rosy." The company maintained its overweight rating, but raised its price target from $2,500 to $3,000.
Wedbush analysts, who have a price target of $2,953 for the stock, said Google presents "a major market opportunity that we expect to accelerate out of the pandemic."
According to Wedbush analysts:
"Alphabet is well positioned in a number of key areas within its businesses that we believe can support overall growth in its core advertising business, enabling sustainable long-term revenue growth in its high-growth cloud business." is becoming."
Despite some calls that Google stocks will become more expensive after this year's rally, 42 companies are still optimistic about the stock, with some of these forecasters demanding gains of more than 20%.
In addition to the company's main advertising business, the pandemic has also given a strong boost to other units that are likely to maintain market share. YouTube's ad revenue soared during the pandemic, as the video-sharing platform reached more users aged 25 to 49 than all cable networks combined.
YouTube ad revenue grew 49% in the quarter, while TikTok's competitor YouTube Shorts registered 6.5 billion views per day in March, up from 3.5 billion at the end of 2020. Google's cloud computing business grew also fast. at a peak in demand for Internet-based teleworkers' services.
Starting point
With its traditional growth engines undisputed and the company positioning itself to grow faster in the post-pandemic world, Google's stock will continue to outperform other megatech peers. The stock could see more upward movement as the economy reopens soon, bringing the sale of digital advertising from hospitality and travel companies back.
