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Our monthly Fire Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of growth-focused Fire recommendations, to help Fools build out their portfolios.
“Best Buys Now” Pick #1:
Alphabet (NASDAQ:GOOG)
- Google parent Alphabet responded to all the negativity regarding its prospects with aplomb in its Q2 results.
- Revenue growth accelerated to 7% year-on-year (9% constant currency) despite all the well-known macro headwinds facing advertising spending.
- Management’s renewed focus on profitability was also clear with operating margins rebounding to 29.3% – the highest they’ve been since the pandemic.
- YouTube is still struggling to return to high levels of growth, which we believe is down to Apple’s ad tracking changes and, to a lesser degree TikTok competition. But otherwise the company is doing well with Cloud posting a second consecutive quarter of profitability and the core business generating its normal level of immense profitability.
- CEO Sundar Pichai has a massive task on his hands to take Alphabet’s years of AI investments and get buy in from across the sprawling organisation to implant that research faster and roll out new products quicker. But we believe with the tens of billions invested in research and computing power plus its access to reams and reams of data, Alphabet has a real head start here.
- On a trailing enterprise value to EBITDA ratio of 17.6x and trailing P/E of 28.4 as of writing Alphabet doesn’t appear as dirt-cheap as it did for much of the past year. But we still believe it could be attractively valued given its huge moat to competition, growth prospects, and unheard of cash flow generation.
