Becoming a millionaire from a single stock is possible, although it isn't an advisable investing strategy. There's too much risk in putting all of your money into just one stock, as there's always a chance something could go wrong. However, pinpointing stocks that can provide market-beating returns can accelerate your path to becoming a millionaire, which is where Alphabet (GOOG -0.11%) (GOOGL -0.08%) comes in.
Alphabet has been a long-term market beater, but can it keep doing it? Let's find out.
Alphabet has several promising segments
Alphabet is a wide-ranging business, with the Google ecosystem, YouTube, cloud computing, artificial intelligence (AI), and the Android operating system all to its name. It has multiple growth opportunities, but most are centered on advertising.
In Q3, nearly 80% of Alphabet's revenue came from advertising. However, this segment will undergo a major reorganization to drive further AI usage and increase efficiency.
Alphabet recently released its Gemini generative AI model, which beats its competition, including OpenAI's GPT-4, in nearly all benchmark tests. Furthermore, Gemini was the first model to beat human experts in the massive multitask language understanding test, showcasing its prowess. While this technology isn't monetized yet, Alphabet will find multiple ways to integrate it over the next few years.
Another exciting segment for Alphabet is its cloud computing wing. Although Google Cloud currently holds a third-place market share of 11%, the total market opportunity for this technology is expected to grow to $1.55 trillion by 2030, according to Grand View Research. Google Cloud's Q3 revenue was $8.4 billion, so it still has a massive growth runway.
Alphabet has many products that are steadily growing, making it a great long-term investment.
But what kind of growth can investors expect?
Alphabet has the makings of a market-crushing stock
Besides a period of massive growth during 2021, Alphabet steadily grew its revenue at a fairly consistent mid-teens pace. However, it has been slower lately because the advertising market took a downturn in late 2022 and early 2023. With the ad market recovering, analysts project Alphabet to grow at about 12% next quarter.
GOOGL Revenue (Quarterly YoY Growth) data by YCharts
Furthermore, Alphabet has massive growth ahead with its cloud computing and AI products, giving its steady advertising business a much-needed growth boost.
So with that expectation alone, Alphabet should be a market-beating investment. However, Alphabet has also been steadily increasing its operating margin through reorganizations and eliminating unprofitable programs. While Alphabet is far from completing this task, the results have been promising.
GOOGL Operating Margin (TTM) data by YCharts
The improvement in operating margin will allow Alphabet to produce more earnings, which will in turn increase the stock price.
Lastly, Alphabet consistently repurchased about $15 billion in its stock each quarter for the past two years. After accounting for stock-based compensation, Alphabet decreased its outstanding shares by around 2.6%. By reducing the outstanding shares, Alphabet can boost its earnings-per-share metric, commonly used to value mature companies like Alphabet.
With a low- to mid-teens growth, improving margins, and share buybacks, you have a recipe for a stock that can grow consistently in the mid-teens. Few stocks can do that over the long term, which is why Alphabet is one of my top stocks to buy right now and hold forever.
