If I’d put £10,000 into Alphabet stock at the start of 2023, here’s what I’d have now

Alphabet stock has realised some handsome gains so far in 2023. How much would I have if I’d bought the shares in the New Year?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Mature couple in a discussion while eating a meal in a restaurant.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Just as with many of its tech peers, Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) stock has boomed in value this year. Considering the shares are one of the S&P 500‘s biggest winners in 2023 thus far, here’s what I’d have if I’d bought stocks in the parent company of Google at the start of the year.

Advertising handsome returns

If I’d invested £10,000 at the very start of the year, Alphabet would have generated a return of approximately 45% on my investment. This translates to roughly a profit of £4,500 (excluding broker fees and/or capital gains tax).

MetricsAlphabet stock
Amount invested£10,000
Stock growth45%
Total dividendsN/A
Total return£14,500
Data source: Alphabet

Given the time frame and broader performance of the stock market, Alphabet has actually produced a rather generous return. The FTSE 100 is pretty much flat, while the S&P 500 is up 17%. Nonetheless, there are a couple of reasons for the stock’s rally this year.

For one, inflation has continued to fall. This has encouraged an increase in discretionary spending, positively affecting advertising. Additionally, forecasts for a US recession were retracted. But most importantly, its focus on AI has excited investors about the potential to improve productivity and margins.

An intelligent investment

The strong double-digit gains that Alphabet experienced earlier in the year may have dissipated slightly since late July. However, this can broadly be attributed to the market’s overall stagnation, having risen sharply since March. Having said that, Alphabet’s gains aren’t just on the basis of AI hype.

Having reported terrible numbers throughout most of 2022, the downturn in the advertising industry seems to have reached its low. Consequently, the firm’s performance has begun ticking back up. It also helps that analysts’ estimates have been relatively muted, allowing the group to comfortably beat projections.

Total revenue£75.60bn£69.69bn7%
Operating profit£21.84bn£19.45bn12%
Diluted earnings per share (EPS)£1.44£1.2119%
Data source: Alphabet

Therefore, it’s no surprise to have seen Alphabet’s most recent Q2 results impressing with plenty of positives to take away. What’s more, the Nasdaq stalwart expects higher earnings to compound over time as its fast-growing Cloud division is now profitable on an operating basis.

Should I buy more?

Healthy free cash flow and strong profit margins (21.1%) show that Alphabet is a strong business with excellent financials. Nevertheless, investors are questioning why the company sits on mountains of cash without returning most of its excess capital to shareholders. Even so, Alphabet retains its appeal.

Alphabet Financials
Data source: Alphabet

Especially when considering its valuation multiples and potential to continue growing its earnings in the medium-to-long term, I feel Alphabet is an excellent business to invest in. In fact, the shares currently trade on a discounted forward price-to-earnings (P/E) ratio of 21.3 relative to their historical average of 30.2.

It’s no wonder why analysts have an average price target of $150 for the stock. This suggests a potential gain of 15% from its current levels. As such, I believe the stock will continue to grow in the years to come, and its current share price could indicate a bargain for long-term investors.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Choong has positions in Alphabet. The Motley Fool UK has recommended Alphabet. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on US Stock

Investing Articles

The Tesla share price is a bargain to me

A lot of people think the Tesla share price is overvalued. Oliver Rodzianko disagrees. He tells us why he’s piling…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

My 12 fears for the stock market in 2024

After a terrific year for global stock markets in 2023, what can I look forward to in 2024? As a…

Read more »

Bournemouth at night with a fireworks display from the pier
Investing Articles

£2k in a Stocks and Shares ISA? One top stock I’d buy before the New Year!

Here's one US stock this writer thinks could grow for a long time to come and deliver attractive returns in…

Read more »

Investing Articles

Why the Tesla share price gives the company a huge competitive advantage

The Tesla share price reflects some optimistic assumptions. But Stephen Wright thinks it also gives the company a competitive advantage…

Read more »

Electric cars charging at a charging station
Investing Articles

If I’d put £10,000 in NIO shares 4 years ago, here’s how much I’d have now

NIO shares are selling for just $7 today after losing a big amount of value over the last couple of…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

While the US stock market booms, the FTSE 100 lags behind. Or does it?

In November, global stock markets had their best month in over three years. Meanwhile, the UK's Footsie keeps falling further…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

Here’s my Tesla share price forecast for 2024

In 2023, the Tesla share price has risen from $123 to $240. Here, Edward Sheldon provides his price target for…

Read more »

Investing Articles

Will the Cybertruck boost Tesla’s share price?

With investors becoming bearish on Tesla, will the release of the Cybertruck boost its share price? Or would it knock…

Read more »