Alphabet Stock Price Up 60% in 2021 – Time to Buy GOOG Stock?
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Alphabet (GOOG) stock is the best performing FAANG stock of 2021 and is up over 60% in the year. What’s the forecast for GOOG stock after the outperformance and is it still a buy?
There has been a lot of divergence in the performance of FAANG stocks in 2021. This is in stark contrast to the last few years where the pack had led the market higher as a group. While GOOG is up sharply, Netflix, the second-best performing FAANG, is up only about 29%. Amazon is the worst-performing FAANG stock and is up only about 4% for the year.
FAANG earnings
Netflix reported mixed earnings last week. However, Facebook posted better than expected earnings and the stock was trading higher in premarkets today despite the whistleblower controversy. Alphabet would release its earnings today after the close of US markets. The remaining FAANG stocks would release their earnings later this week.
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Alphabet earnings
Analysts polled by TIKR expect Alphabet to report revenues of $63.3 billion in the third quarter of 2021, a year-over-year rise of 37.1%. The steep rise in coming from a lower base as ad revenues had tumbled in 2020. Alphabet’s revenues had risen about 14% in the third quarter of 2020. The company’s revenue growth is expected to come down in the coming quarters. Analysts expect the company’s revenues to grow 23.6% and 18.9% respectively in the next two quarters.
GOOG is expected to report an adjusted EPS of $23.37 in the third quarter, a year-over-year rise of 42.5%. Meanwhile, Wall Street analysts are bullish on the stock ahead of its earnings release. Yesterday, Bank of America said that it is “constructive” on GOOG stock ahead of its earnings report.
Analysts are bullish on GOOG stock ahead of earnings
“Despite added IDFA and supply chain uncertainty in 4Q, we remain constructive the stock given: reasonable 18x 2022E core earnings P/E in our SOTP (sum of the parts), expected relatively stability of search vs social due to added 4Q search activity.” Notably, the supply chain challenges have also hit the online ad businesses. Snap pointed to the weakness in the ad business amid the supply chain issues. Snap stock fell over 26% after the earnings. Other social media names including Facebook and Twitter also tumbled after Snap’s earnings.
Earlier this month, JPMorgan also reiterated GOOG stock as overweight. “After delivering ~$670B of market cap gains this year, we see GOOGL as clearly the most liked, best owned, and least discussed of the mega-cap Internet names,” it said in its note.
GOOG stock price forecast
Most Wall Street analysts are bullish on GOOG stock and 44 out of the 46 analysts polled by CNN Business rate it as a buy or some equivalent. One analyst each rates GOOG as a hold and sell. Its median target price of $3,200 is a premium of 15.4% over current prices. Alphabet’s street high target price of $3,600 implies an upside of almost 30% while the street low target price of $2,520 is a discount of 9.1%.
Alphabet stock long term forecast
Like other Big Tech companies, Alphabet is also facing global scrutiny over its alleged ant-trust behavior. There is also a global pushback against tech giants and many countries are looking to impose a digital tax.
That said, the long-term forecast for GOOG stock looks positive looking at the digital transformation. Over the medium to long term, higher monetization on the YouTube platform would help the company increase its topline as well as bottomline. Alphabet is also betting aggressively on the cloud and revenues increased significantly in the second quarter. Overall, Alphabet has a monopolistic lead in the search market and a strong leadership position in the smartphone operating system.
Alphabet stock technical analysis
Alphabet stock is looking mixed on the charts. While it trades above the 100-day and 200-day SMA (simple moving averages), it has fallen below the 10-day, 30-day, and 50-day SMA. The 50-day SMA has been a strong support channel for the stock. Bulls would fancy their chances if GOOG stock rises above the 50-day SMA after the earnings release.
The 14-day RSI (relative strength index) is a neutral indicator while the 12,26 MACD (moving average convergence divergence) gives a buy signal for GOOG stock.
Should I buy GOOG stock?
GOOG is among the best tech stocks to buy and play multiple themes. However, the stock’s valuations have surged over the last couple of years and the current forward PE of 28.3x is a massive premium to its long-term valuation. Among other tech companies, Apple and Microsoft have also seen a valuation multiple rerating while companies like Amazon are trading at a discount to their long-term trading multiples.
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