Alphabet (Nasdaq: GOOGL) (Nasdaq: GOOG) is the parent company of Google, YouTube, the Android operating system, and more. Alphabet’s current business relies heavily on online advertising, with more than three-quarters of its revenue coming from advertising in the first quarter of 2023.
Advertising, especially online advertising, is a growing market, but not immune to economic downturns. Unfortunately for Alphabet, advertising budgets have been an early victim as many companies look for ways to cut costs in the economic downturn. Still, if there is any remaining advertising budget, it is often spent on Alphabet.
Growth in global digital ad spending is expected to remain weak this year. But by 2026, some expect the total to exceed $800 billion, up from $550 billion in 2022.
Alphabet’s cloud computing and artificial intelligence businesses could also be growth drivers. In fact, Alphabet’s cloud computing revenue in the first quarter was $7.5 billion, up 28% year over year. Meanwhile, the global AI market is projected to grow from $142 billion in 2022 to $1.85 trillion by 2030.
With its recent price-to-earnings and price-to-sales ratios below their five-year averages, Alphabet’s stock looks attractive to long-term investors. (The Motley Fool owns shares of Alphabet and recommends Alphabet.)
ask the fool
From MM, Walnut Creek, CA: Why do interest rates go up and down?
The Fool answers: They are affected by many factors, including inflation, bond markets (including Treasury bills, short-term bills, and bonds), and actions by the Federal Reserve.
Inflation has averaged about 3% a year for decades, but has risen considerably in recent years, reaching 8% in 2022. (13.5% in 1980, nearly 18% in 1917; minus 10.3% in 1932, or deflation).
To combat inflation, the Federal Reserve can try to slow the economy by raising short-term interest rates through the “federal funds” rate (the rate at which banks charge each other when they lend and borrow money). The Fed also sets the “discount rate”, the rate that banks pay to borrow short-term money. The Fed can try to boost a struggling economy by cutting interest rates and encouraging businesses and citizens to borrow (and spend) money.
Federal funds and discount rates directly or indirectly affect prime rates, mortgage rates, credit card rates and other interest rates. The Fed can also influence interest rates by buying or selling bonds, injecting money into or withdrawing money from the national supply, respectively.
From PK in Chesterbrook, Pennsylvania: I recently found two companies with similar stock prices in the same industry. The price of one went up while the price of the other went down. Can you please explain this?
The Fool answers: A similar stock price was almost a coincidence. Every company is unique, even in the same industry. Each company has its own level of cash and debt, profit margins and growth rates, and has its own strengths, risks and growth potential. Each company’s stock price may be overvalued or undervalued and may rise or fall accordingly.
school of fools
When most people hear the word “Dow,” they think of it as referring to the entire US stock market. But the Dow Jones Industrial Average is an index of just 30 companies.
The current 30 companies are 3M, American Express, Amgen, Apple, Boeing, Caterpillar, Chevron, Cisco Systems, Coca-Cola, Dow (chemical company), Goldman Sachs Group, Home Depot, Honeywell International, International Business Machines (IBM), Intel, Johnson & Johnson, JPMorgan Chase, McDonald’s, Merck, Microsoft, Nike, Procter & Gamble, Salesforce and Travelers Companies. , UnitedHealth Group, and Verizon. Communications, Visa, Walgreens Boots Alliance, Walmart, Walt Disney.
Founded in 1896, the Dow initially included only 12 stocks, including now-obscure stocks such as US Leather and National Reed. (General Electric is the best-known original constituent, but was removed from the index in 2018.) The last constituent change was in 2020, with Salesforce, Amgen, and Honeywell International replacing ExxonMobil, Pfizer, and Raytheon Technologies.
It is weighted by market capitalization, so unlike many stock indices where the largest component matters most, the Dow is weighted by price. Therefore, the Dow company with the highest share price will have the greatest impact on the average. For example, Goldman Sachs, which recently traded at $325, is worth more than Apple, which recently traded near $190, even though Apple’s $3 trillion market cap far exceeds Goldman’s $108 billion market cap.
The Dow is often used as a benchmark for the entire US stock market and even the US economy. However, it is worth remembering that although it has diversified in terms of industry, it still consists only of very large companies. The 500-company S&P 500 index, despite its size, is arguably a better measure of the broader US market.
Finally, watch out for overhyped headlines in the media, such as “Dow Plunges 400 Points!” The Dow has recently been near $34,000, a 400-point gain of only about 1.2%. Focus on percentages, not points.
my stupid investment
From P, online: My most regrettable investment move was selling 500 shares of Amazon.com stock to buy a car in 2000, when the stock market was in my teens. We made a profit of about $3 per share. ah.
The Fool answers: Oh sure. Amazon.com split its stock 20-1 last year, so if you’re lucky you’ll own 10,000 shares — the stock recently traded at nearly $130 a share. The total amount will be approximately $1.3 million. If the split didn’t happen, you would own 500 shares, which would cost him nearly $2,600 a share, for a total of $1.3 million. (Note that a split primarily only changes the number of shares owned. In a normal stock split, as the number of shares increases, the stock price decreases proportionally.)
Remember, back in 2000, Amazon.com could not have predicted a total market value of well over $1 trillion by mid-2023. The company only expanded its product range beyond books in 1998, adding music, video and DVD sales, and in 2000 brought third-party distributors to the market. If you were so bullish about Amazon’s future, you might have held on to some or all of your stock, perhaps by buying a cheaper car. But even if it’s not, it’s not crazy to sell.
Who am I?
My roots go back to 1880 when two brothers borrowed $200 to buy a wooden jacket can manufacturing business in Buffalo, New York. Corrosive contents tend to damage tin cans, so by 1884 they were creating iconic glass jars for preserving fruit. Now based in Westminster, Colorado, with a recent market value of nearly $18 billion, the company specializes in sustainable aluminum packaging for the beverage, personal care, household, aerospace and other industries, as well as the U.S. government. I’m one of the world’s largest beverage can manufacturers. Who am I?
Remember last week’s trivia question? Find it here.
Last week’s trivia answers: Clorox