Many technology stocks rose in 2023 thanks to the rise of artificial intelligence (AI). Among them was Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL)which uses AI in a number of products, including its ubiquitous Google search engine.
Alphabet’s fortunes plummeted from a stock price hitting a 52-week low of $84.86 last January to a 52-week high of $142.68 on Boxing Day. So, what does 2024 have in store for us?
Well, the new year is already shaping up to be an interesting one for the company. Alphabet faces potentially major upheaval in 2024, and these factors may affect the decision to invest in Alphabet. So it’s prudent to review these events to determine if Alphabet is a stock to buy in the new year.
Alphabet’s “Chrome-ageddon”
A key factor that could affect Alphabet’s stock is the company’s decision to phase out third-party cookies from its popular Chrome web browser. These cookies are used by advertisers to target you with digital advertisements based on your internet activities, such as the websites you have visited.
This online tracking has raised consumer privacy concerns. Alphabet has therefore decided to move away from third-party cookies, which would eliminate the current targeting mechanism that advertisers rely on.
It’s so bad that many in the advertising industry are calling this end of third-party cookies “Chrome-ageddon,” because Chrome is the top-ranked web browser in the world, holding about 64% market share. AppleThe Safari browser is in second place, with a 20% share.
Alphabet is launching a months-long process to phase out third-party cookies in the first quarter of 2024. The company is moving Chrome to the Privacy Sandbox, a system developed by Google.
The Privacy Sandbox limits the sharing of information about your online activity with third parties. Instead, the data stays on the device you are using and is accessed by websites or apps you visit to serve you ads targeted to your interests. In this way, Privacy Sandbox attempts to balance the needs of consumers and advertisers.
This also means that Alphabet will oversee the data collected from Chrome users, providing a strong incentive for advertisers to continue spending their budgets with the company. A successful transition to Privacy Sandbox is important because advertising accounted for $59.6 billion of Alphabet’s $76.7 billion in third-quarter revenue.
Once Privacy Sandbox is in place, it could strengthen Alphabet’s strategy. economic gap in the digital advertising industry. After all, advertisers would be hard-pressed to avoid running ads on the company’s globally popular products, such as Google and YouTube.
Alphabet’s other challenge for 2024
However, Google’s search engine supremacy has attracted the attention of the US Department of Justice, which has filed an antitrust lawsuit against the company. The suit focuses on payments Alphabet made to companies, like Apple, to make Google the default search engine on their platforms.
The trial is ongoing and closing arguments are scheduled for May. The outcome could range from a fine to requiring Alphabet to restructure its business.
Alphabet recently lost a separate antitrust lawsuit related to its Android mobile app store. But those sales represented only a portion of Google’s other non-advertising revenue, which brought in $8.3 billion in the third quarter, far less than the $44 billion generated by advertising on Google’s search engines.
Yet the arguments against Google’s search dominance may not be bad news. Microsoft was the subject of a similar antitrust lawsuit in 1998 over payments made to Internet service providers to boost adoption of its Internet Explorer browser. The company reached a settlement. Since then, Microsoft’s stock price has increased over the years.
So, if Alphabet also manages to reach a settlement in its antitrust case, its business could remain prosperous in the long term. The company is doing well, as its third-quarter revenue of $76.7 billion represents an 11% year-over-year increase.
Deciding on Alphabet Stock
Alphabet’s transition from third-party cookies and the antitrust lawsuit against Google could lead to a bumpy ride for its stock price in 2024. Still, over the long term, Alphabet remains a compelling growth investment.
The 11% year-over-year sales increase in the third quarter is complemented by strong financial data. The company’s assets in the third quarter were $396.7 billion, including $119.9 billion in cash, cash equivalents and marketable securities. Compare that with total liabilities of $123.5 billion.
Additionally, Alphabet is benefiting from the booming global digital advertising industry, which is estimated to be worth $966 billion by 2028, growing from $680 billion in 2023 to $966 billion. other growth driversincluding its cloud computing business, Google Cloud.
Now, AI offers Alphabet another avenue for revenue expansion. The AI ​​sector is expected to grow 20-fold by 2030. So it makes sense to buy and hold Alphabet stock for the long term, as any price fluctuations in 2024 may pale in comparison to the AI ​​industry’s opportunities. growth of the company’s revenues over the long term.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Robert Izquierdo holds positions at Alphabet, Apple and Microsoft. The Motley Fool holds positions and recommends Alphabet, Apple and Microsoft. The Motley Fool has a disclosure policy.
Is Alphabet Stock a Buy for 2024? was originally published by The Motley Fool
