See why this tech giant is poised for long-term growth despite recent price drops.
Buying Alphabet (GOOG 1.05%) (GOOGL 0.99%) stock is rarely a bad idea.
Imagine picking up $1,000 of Alphabet stock on Feb. 25, 2014. That turned out to be the worst day of that year to get into the technology giant’s shares. The day’s peak, with a record price of $30.50 per split-adjusted share, was followed by an 18% plunge over the next 10 months. The bear bait stacked up as European regulators considered breaking up the company, Android phone sales struggled, top executives left, and new product ideas like Google Glass and Waymo self-driving cars weren’t catching on.
That’s all right, though. If you had held on to that $1,000 investment through thick and thin, you’d have a market-beating $5,310 in your pocket roughly 10 years later.
GOOGL Total Return Level data by YCharts
Alphabet’s stock has stumbled before — and come back swinging
You would of course have done even better if you invested in Alphabet on any other day of that year, but the company overcame its issues and stomped the broader market even from the worst possible starting point of 2014. I expect future generations to say similar things about buying Alphabet stock in 2024 — that investment should beat the market for many years or even decades to come, no matter how poorly you may have timed the purchase.
Time in the market beats timing the market, you know. And this company was built to last for a very long time.
I can’t think of any single company more likely than Alphabet to deliver robust returns in 2040, 2050, and beyond. That terrible price drop in 2014 is a barely detectable chart squiggle by now. And Alphabet’s business results just continued to grow:
GOOGL data by YCharts
Alphabet’s stock is a bargain right now
Wait — it still gets better. On top of Alphabet’s tank-like staying power, the stock happens to be unusually affordable right now.
After reaching another all-time record of $191.40 per share in July, Alphabet shares have retreated 15% to roughly $162 per share. As I write this, they trade at 23.4 times trailing earnings with a price-to-earnings-to-growth (PEG) ratio of 1.1. These are the most affordable earnings-based valuation ratios among the “Magnificent Seven” of tech giants.
Moreover, Alphabet has taken a leading role in the artificial intelligence (AI) boom. Google Cloud is a popular cloud computing platform where other companies can train and run their own AI platforms. The Google Gemini chatbot competes directly with OpenAI’s ChatGPT in language understanding and generation. The company is poised to make the most of generative AI as a long-term growth catalyst.
I could go on, but you get my point. Alphabet’s stock was a fine investment before the recent sell-off, and it’s an even better buy today. Market sell-offs can be your friend when you’re looking to invest in a great company like Alphabet.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Anders Bylund has positions in Alphabet and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Alphabet and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
