Here's My Top Stock to Buy Right Now
While there are many great stocks available, there can only be one "best stock to buy." Narrowing it down was difficult, but I think Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) tops the list. Although Alphabet is the world's fourth-largest company by market cap, it still has plenty of room to grow. Buying the stock now sets investors up nicely for 2025, because I think the company can excel next year.
Alphabet is better known as Google's parent company, although it also owns the Android operating system and YouTube, among other things. While it has interests in many places, the majority of its business can be attributed to advertising. In the third quarter, advertising made up 75% of its total revenue, so it's clearly a big part of the company.
Investing in High-Growth Sectors
One of the areas Alphabet is focusing on is cloud computing, which nicely ties into its artificial intelligence (AI) aspirations. Its cloud computing wing, Google Cloud, has been a tremendous performer lately, with revenue rising 35% year over year. This growth is occurring for multiple reasons, one of which is that Google Cloud provides access to one of the top generative AI models, Gemini.
Use of the Gemini model in APIs (application program interfaces) -- plug-and-play apps that allow programmers to use another pre-built application easily -- grew 14 times year over year. Building generative AI into various workflows and interfaces is becoming more popular, and its use will only increase over the next few years, boosting Google Cloud's revenue.
Strong Financial Performance
Strong financial results are another key reason to invest in Alphabet. In the third quarter, Alphabet grew revenue 15% companywide. Thanks to improved operating efficiencies, earnings per share (EPS) increased from $1.55 last year to $2.12, a 37% rise.
That's an incredibly strong performance from a fairly mature business, yet the stock gets no respect. It trades at just 20.9 times forward earnings, which is less than the broader market, as measured by the S&P 500, which trades at 24.6 times forward earnings.
Value Investment Opportunity
Alphabet is doing far better than Apple and Microsoft, yet it's trading at a much lower multiple. As a result, investors should reconsider their positions in those two and look into Alphabet and Meta Platforms.
However, part of this valuation discount comes from the concern that the Department of Justice is seeking to break up Alphabet by forcing the sale of Google Chrome. This is obviously a concern, but we are likely some time away from having a resolution. Because of that, I think using the short-term weakness of this news to your advantage is a smart move.
Alphabet is a fantastic business, but it doesn't trade near the multiple its peers do. Although there are some unknowns with how the DOJ settlement ends up, I think those fears have already been priced into the stock. As a result, investors should use this opportunity to purchase more of its stock before that trend comes to an end.
