The stock is down about 30 per cent from its highs, which makes for a prime opportunity for investors who have been looking to get in on Alphabet (Alphabet Stock Quote, Charts, News, Analysts, Financials NASDAQ:GOOGL). That’s the take from portfolio manager Christine Poole, who sees Google maintaining its dominance in the online ad market.
Google shares did exceptionally well over the pandemic, more than doubling in value from early 2020 to the end of 2021, but the past year has been less friendly, as GOOGL went from just under $150 a share to now around the $90 mark. That’s a lot of wealth vanishing for a company still boasting a market cap of $1.2 billion.
Operationally, Alphabet has taken hits to its top and bottom lines courtesy of a drop in online ad spending, as businesses tighten their belts during the current economic turmoil. Shares dropped in late October after Alphabet missed earnings estimates in its third quarter, coming in at $1.06 per share versus $1.25 per share analysts had forecasted. Revenue at $69.09 billion was also under the expected $70.58 billion, with management saying major reductions in staff would be coming in an attempt at cost cutting. (All figures in US dollars.)
What’s more, Google’s continued supremacy in the search engine business has recently been questioned with the rise of AI-enabled chat bots like ChatGPT, with many speculating that in the future there’ll be a lot fewer clicks on online ads once people turn to AI bots for their queries.
But Poole thinks there’s plenty of gas left in the tank for Alphabet, which she recently nominated as one of her Top Picks for the next 12 months.
“We saw some of the slowdown in the results from the past quarter. They grew quite rapidly during the pandemic, and so it will hit them because they’re so large and prevalent now,” said Poole, CEO of GlobeInvest Capital Management, who spoke on BNN Bloomberg on Wednesday.
“But we do think they’re still the leader in online advertising given their dominance in search. They’re still going to garner a large portion of that ad budget when companies have to spend,” she said.
Poole said GOOGL’s valuation has come down quite a bit and investors should take advantage.
“I think given the contraction we’ve seen in the multiple and the pullback, this is a great opportunity to add to buy this name for long term appreciation,” Poole said.