Alphabet on the Verge of Reaching $1 Trillion Valuation as Google Keeps Churning Cash
Google’s parent Alphabet (NASDAQ:GOOGL) is on the verge of reaching a historic milestone. The company’s stock price opened today at $1435.25, just $5 or 0.35 percent short of hitting $1440.24 and the attendant $1 trillion market capitalization.
The tech giant came within 1 percent of hitting the prized threshold on Friday following a 7 percent rally since the start of 2020. The stock has remained buoyant recently on hopes that Alphabet will report an-all-time-high advertisement revenue as part of its earnings report for the fourth quarter of 2019 due on the 3rd of February 2020.
As a reference, Apple (NASDAQ:AAPL) was the first U.S. public company to reach a $1 trillion valuation back in August 2018. Thereafter, Microsoft (NASDAQ:MSFT) became the second such company to reach this threshold and was soon followed by Amazon (NASDAQ:AMZN). Interestingly, Apple currently has a market capitalization of $1.35 trillion while Microsoft’s is at $1.23 trillion. On the other hand, Amazon’s market cap has fallen back from the trillion-dollar threshold and is currently hovering around $942.54 billion.
Advertisement continues to be a major revenue driver for Alphabet and Google’s division rakes in 99.6 percent of the company’s total revenues. In a remarkable feat, Google began the past decade with revenue growth of 24 percent and has ended it with the same breakneck pace. For the fourth quarter of 2019, the company is expected to report an annualized growth in revenue of 20 percent even though the magnitude of this metric – at over $160 billion – is about five times bigger when compared with 2010 levels. A booming mobile advertisement segment has been responsible for much of this growth trajectory with the segment overtaking Google’s traditional desktop search business in 2018.
Should Alphabet succeed in achieving the trillion-dollar threshold, it would cap a boisterous time at the company which is undergoing a monumental leadership transition. As a recap, Google co-founders Larry Page and Sergey Brin announced last month that they were stepping back from an active role at the helm. The move has renewed hopes on the Street that the more disciplined leadership of the CEO Sundar Pichai will be able to restrain expenses – by curtailing Alphabet’s hitherto unbridled spending on the so-called moonshot projects – and deliver further growth in earnings along with a stock price boom.
Alphabet’s current prospects remain as promising as ever. The company is banking on segments such as the Play app store, cloud computing and hardware sales – including those of the Pixel lineup – to deliver further top-line growth. Interestingly, these segments already make up about 16 percent of Alphabet’s total revenues. The Waymo driverless car division is another promising weapon in Alphabet’s arsenal and has been valued as high as $150 billion by some Wall Street analysts.
It should come as no surprise, therefore, that Alphabet remains a favorite stock among fund managers. As an illustration, today’s 13F filing by Evanson Asset Management with the U.S. SEC revealed that the fund has maintained its Alphabet stake of 18,000 shares over the past quarter. Additionally, as of today’s opening price of the Alphabet stock, this stake is worth at least $25.83 million.