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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)
- The slowdown of sales growth from Alphabet’s cloud unit in Q3 was disappointing, especially compared to accelerating growth from larger rival Microsoft. But Google Cloud revenue only accounts for 10% of Alphabet revenue and the news for most of the rest of that 90% of revenue was positive In the quarter.
- Online advertising sales growth accelerated to 10.7% in the quarter as the global economy, and thus marketing spending, proved remarkably resilient and the long-term shift to online over offline ad spending continued apace.
- That sales growth and continued cost control efforts are leading to further gains in profitability with operating margins rising to 27.8% during the three months to September 30.
- The slowdown in Cloud growth is a worry though. CEO Sundar Pichai also needs to accelerate the pace at which Alphabet’s years of very expensive AI research is Integrated into actual products. Threats from regulators likewise bear keeping a very close eye on.
- But we shouldn’t lose sight of the dominant position Alphabet holds in online advertising, the huge cash flow it pumps out quarter after quarter, and current valuation of 26x trailing earnings that we believe all warrant taking a closer look at the group this month.
