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Is Alphabet's (GOOGL) Stock Still a Millionaire Maker 20 Years After its IPO?

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This week marks 20 years since Alphabet (GOOGL - Free Report)  went public with the holding company being one of the most innovative firms of the 21st Century.

Formerly known as Google, the iconic search engine pioneer has evolved to cloud computing, ad-based video and music streaming, autonomous vehicle production, and healthcare developments among other endeavors.

Alphabet has also made significant investments in artificial intelligence and machine learning technologies through its Google research team Brain.

Lucrative acquisitions have fueled Alphabet’s growth with its stock up +19% year to date and skyrocketing over +6,000% since going public in 2004 which has dwarfed the gains of the S&P 500 and Nasdaq.

Zacks Investment Research
Image Source: Zacks Investment Research

Alphabet’s Acquisition History

Along the way to being a tech behemoth, Alphabet has acquired over 200 companies with the largest being the $12.5 billion acquisition of Motorola Mobility in 2012. This acquisition was aimed at accelerating innovation and choice in mobile computing and played a crucial role in implementing the Google Android ecosystem, the largest rival to Apple’s (AAPL - Free Report)  iPhone iOS.

Other Lucrative Acquisitions

Where 2 Technologies (Acquired in 2004 for an estimated $400 million and led to the creation of Google Maps)

YouTube (Acquired in 2006 for $1.65 billion) - Video and music streaming platform

DoubleClick (Acquired in 2007 for $3.1 billion and implemented into Google Marketing)

Waze (Acquired in 2013 for $966 million) -Traffic and navigation app

Nest Labs (Acquired in 2014 for $3.2 billion) - Smart home products

DeepMind (Acquired in 2014 for $500 million and merged with Brain in regards to AI development)

Twitch (Acquired in 2014 for $970 million) - Live streaming platform for gamers

Looker (Acquired in 2019 for $2.6 billion to provide business intelligence software and data analytics in Google Cloud)

Fitbit (Acquired in 2019 for $2.1 billion) - Wearable fitness devices and app

Mandiant (Acquired in 2022 for $5.4 billion) - Independent cybersecurity services also implemented in Google Cloud

Stock Split History

Alphabet’s brilliant performance has led to the company splitting its stock twice in its history, the most recent being a 20-1 stock split in July of 2022.

The first stock split was a 2-1 split in March of 2014. This split also created two classes for shareholders, Class C shares with no voting rights under the ticker symbol (GOOG - Free Report)  and Class A for shareholders with voting rights under the new ticker symbol GOOGL. 

Macrotrends

Image Source: Macrotrends

Growth Trajectory

Based on Zacks estimates, Alphabet’s total sales are now projected to rise 15% in fiscal 2024 and are slated to increase another 11% in FY25 to $330.36 billion. Annual earnings are expected to soar 31% this year to $7.63 per share versus EPS of $5.80 in 2023. Alphabet’s bottom line is projected to expand another 13% in FY25 to $8.64 per share.

Zacks Investment Research
Image Source: Zacks Investment Research

Alphabet’s Dividend

Alphabet recently paid its first-ever dividend in June, which it plans to pay out quarterly with a current yield of 0.48%.  

Zacks Investment Research
Image Source: Zacks Investment Research

Monitoring Alphabet’s Valuation

At current levels, Alphabet’s stock trades at 21.9X forward earnings which is slightly beneath its Zacks Internet-Services Industry average of 23.2X and the S&P 500’s 23.6X. Notably, Alphabet trades nicely beneath its decade-long high of 37X forward earnings and at a discount to the median of 26X during this period.

Zacks Investment Research
Image Source: Zacks Investment Research

Recent Headwinds & Average Zacks Price Target

Attributed to its dominance, some of the headwinds Alphabet has faced pertain to regulatory issues. Recently, the U.S. Department of Justice (DOJ) ruled that Google has illegally monopolized the online search and text advertising markets. Implementations of such could potentially lead to forcible actions against Alphabet to break up its businesses or the restriction of certain services.

Still, the Average Zacks Price Target of $204.71 a share suggests 22% upside in Alphabet’s stock from current levels.

Zacks Investment Research
Image Source: Zacks Investment Research

Conclusion

Over the years, Alphabet’s stock has taken it shareholders on a wonderful ride and has certainly been a millionaire maker for early investors. That said, GOOGL currently lands a Zacks Rank #3 (Hold) as the next wave of gains may take some time considering potential antitrust headwinds from the DOJ although Alphabet remains one of the most innovative companies to invest in.


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