2022 was a tough year for the stock market. Concerns stemming from a difficult economy triggered significant selling activity and stock prices plummeted.High-tech oriented Nasdaq Composite In 2022, it decreased by 33%. This is his sixth decline at or above that level in the past 50 years.
In the midst of the crash in 2022, alphabet (NASDAQ:GOOG) (NASDAQ:Google) Achieved 1-20 stock split. Analyzing stock split stocks can be an interesting exercise as it can shed light on companies that have experienced increased trading volumes and sharp rises in their stock prices. Although stock splits do not inherently increase the value of a company, experienced investors know that demand for a company's stock typically tends to increase after a stock split – the company's Because the stock price is perceived as low – which will ultimately push the stock price higher.
Since its split in July 2022, Alphabet stock has returned about 28%, much lower than big tech stocks. microsoftApple, Amazon, Meta, and Nvidia. I think a lot of it has to do with artificial intelligence (AI) and which companies are considered emerging leaders.
Microsoft, Nvidia, and even tesla AI is attracting the most attention. Microsoft started the AI race after investing his $10 billion in OpenAI, the developer of ChatGPT.Meanwhile, demand for Nvidia's semiconductor chips used to train generative AI models is skyrocketing, and Tesla Commercialization of autonomous driving is imminent.
Given this level of competition, AI investors may have missed Alphabet's progress. In fact, billionaire hedge fund manager Bill Ackman believes Alphabet's AI business is so neglected that investors can buy it for “free.”
I agree with Ackman's position and think Alphabet stock is a bargain. Let's dig into why 2024 is the perfect time to buy stock in this undervalued AI leader.
A trip down memory lane
Since its inception in 1971, the Nasdaq Composite Index has produced negative returns only 14 times. The only periods in which the index's returns declined consecutively were in 1973 and 1974, and in 2000, 2001, and 2002.
These trends highlight the Nasdaq's resilience, given that it tends to recover after down years. But while inflation is starting to subside and many economists believe the Fed is done raising interest rates, I'm not sure if the market turmoil from 2022 is still in the back of my mind. I'm not surprised. This is especially true for tech stocks.
Over the past 20 years, the Nasdaq has fallen more than 30% only three times: in 2002, 2008, and 2022. Interestingly, after the market crashes of 2002 and 2008, the Nasdaq continued to rise in subsequent years. From 2002 to 2007, Nasdaq's average annual return was 15.9%. And from 2009 to 2010, the index increased by an average of 30%.
To be clear, Nasdaq's past performance is no guarantee of future results. But given the strong demand for AI, I think 2024 could be another strong year for tech stocks, following the Nasdaq's 43% rebound last year.
Alphabet's advances in AI could be just the beginning
In recent years, the broader economy has been plagued by high inflation and borrowing costs, forcing companies of all sizes to rein in spending and operate on leaner budgets. These macroeconomic factors hit a variety of sectors, and the technology environment was particularly affected as demand for expensive software applications began to decline.
With Alphabet and its huge advertising business, marketers are becoming increasingly selective about how they allocate their campaign funds. It's no surprise that this has put Alphabet at the center of a fierce battle between competing social media platforms TikTok, Facebook, and Instagram.
Nevertheless, Alphabet is investing significant capital into new products and services, which are already helping the company return to a growth trajectory. We have integrated AI capabilities across our ecosystem, including areas such as Google Cloud, Google Search, video sharing website YouTube, and productivity tools within Google Workspace.
Additionally, the release of a ChatGPT competitor called Gemini could be the catalyst for the company to be considered a leader among AI developers. But even with all these exciting gains, Alphabet stock hasn't commanded a premium commensurate with big tech stocks, making the stock an attractive buy at its current valuation.
Alphabet stock looks pretty cheap
The chart above shows the forward price/earnings ratio (PER) multiple for the Magnificent Seven stock. With a forward P/E ratio of 20.3, Alphabet stock is effectively tied for last place with Meta.Moreover, this is exactly S&P500The company's forward P/E ratio of 20.7 may indicate that investors do not expect Alphabet to outperform the broader market.
To me, Alphabet stock is unfairly undervalued. I think many people are wary of the company's growth prospects even though inflation is slowing and the Federal Reserve could potentially cut interest rates this year. More specifically, while the recovery in the company's ad sales in 2023 is encouraging, keep in mind that sales grew only 7% year over year in the first nine months of 2023. .
I think this is a short-sighted concern, especially as there are tailwinds that could boost digital advertising platforms in 2024. Additionally, Alphabet has made significant advances in cloud computing, a market now largely dominated by Amazon and Microsoft.
There is no doubt that Alphabet has a lot to prove. However, keep in mind that this stock has given investors more than his 5,300% return since its 2004 initial public offering. His $1,000 investment 20 years ago is now worth about $54,000.
To me, this confirms Alphabet's long-term strong performance. Although the company will continue to fend off an increasing number of competitors, I think management is taking great actions to diversify Alphabet's products and services and create a foundation for long-term sustainable growth. With the stock trading at such a discount, it seems like a great time to scoop up the stock and hang on.
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Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool's board of directors. adam spatacco We have positions at Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has Disclosure policy.
History says the Nasdaq will crash in 2024. Here's one artificial intelligence (AI) stock split stock you should buy and hold forever. Originally published by The Motley Fool
