Alphabet, Google’s parent company has proved with a long list of reasons and/or indicators to be the top-performing Big Tech stock of 2021 and is only a short mile from ending its best year from an investment perspective since 2009.
The company’s stock is up 68 percent this year and closed at $2938.33 as of Thursday. The year is about five days away from ending and it’ll take only a miracle or a magic spell for any of its biggest contenders to catch up!
Up 51 percent this year, Microsoft is Alphabet’s biggest contender. Apple follows suit; the tech titan soared 33 percent. Meta, which was formerly Facebook, stands at 23 percent and Amazon at 5 percent. We can also decide to add Tesla which soared 51 percent this year.
Many companies around the world were hugely affected by the Coronavirus pandemic and the global shortage in chips, among other factors that hindered operations this year. Alphabet, irrespective of these challenges, proved to be stronger than the pandemic and the recent bout of inflationary concerns. Alphabet gets the greater part of its revenue from Google’s advertising business. Even with challenges and the pandemic, the company marked an increase to web and mobile search, maps and YouTube videos. Google’s growing cloud infrastructure unit also had an explosion thanks to remote work.
Alphabet’s third quarter earnings surpassed the estimates of analysts. The tech giant recorded a 43 percent increase in advertising revenue to $53.1 billion, and an increase in YouTube ad sales to $7.2 billion.
Thanks to a lack of reliance in Apple and its control over the Android operating system (OS), the company escaped the effects of Apple’s privacy changes to its iOS which companies like Facebook and Snap were left at a disadvantage as a result.
According to an average estimate by analysts in a Refinitiv survey, Alphabet’s revenue is expected to rise 39 percent to $254 billion, and would mark the fastest growth since 2007 and follows a year of just 13% expansion, as the Google parent reckoned with a brief drop in revenue, for the first time, in the second quarter of 2020. In early 2021, Google’s search business began growing at pre-pandemic levels, driven by a rebound in advertising. Countries began reopening and consumers searched more for products and travel options while spending additional time on YouTube, which saw the most significant growth of any social media app among American users during the pandemic, according to the Pew Research Center.
According to an October report from analysts at Argus, “Alphabet’s recovery from the 2Q20 COVID-19-induced advertising slump has been remarkable. We see continued momentum in the coming quarters as e-commerce and digital advertising have burgeoned with economic recovery”.
The last time Google delivered better returns for Wall Street was 12 years ago, when the stock more than doubled for the year. It was only a small company then, and its market cap didn’t hit $1 trillion until January 2020. Shortly after, in less than 24 months, Alphabet saw its valuation rise by almost another trillion and was just few figures short from $2 trillion. It hit this new milestone in November. And as of last week’s close, the company’s market cap stood at $1.95 trillion.
Advertising isn’t the only thing that has pushed Alphabet this far. Revenue in Google’s cloud division climbed 45% to $4.99 billion in the third quarter, while operating loss narrowed to $644 million from $1.21 billion a year earlier. Google Cloud Platform trails Amazon Web Services and Microsoft Azure in the cloud infrastructure market, but it’s benefiting from an emerging multicloud trend, as big businesses spread their workloads rather than relying on a single vendor.
The company also had huge returns from its investment arms GV and Capital CapitalG. Many of the companies under its portfolio went public this year and in the third quarter, the company recorded profits on investments of $188 million from $26 million the previous year.
For now there are no predictions for 2022. The company may have to find new growth drivers if it plans on continuing in this path. Revenue growth, however, is expected to slow to 17 percent, around the spot it was before the pandemic hit. Investors still continue to wait for some progress from Alphabet’s “Other Bets”. Its self-driving car company Waymo still continues to lose a lot of money. Alphabet still has quite a ton of other projects that haven’t been able to break out yet.