Alphabet Inc (GOOGL) Stock Is Best-of-Breed, But Is It a Buy Now?

The FANGs have hit a wall of late. Alphabet Inc (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB) have inched ahead by less than 1% over the past month, while Amazon.com, Inc. (NASDAQ:AMZN) is down 1% and Netflix, Inc. (NASDAQ:NFLX) has dropped more than 3%. It’s far from disastrous, but it’s not encouraging either — and if nothing else, it’s certainly a divergence from their otherwise go-go performance in 2017.

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Of particular interest to me right now is GOOGL stock, which is one of my favorite FANG positions.

Let’s jump in.

A Look Under the Hood

Alphabet is more interesting than concerning right now in large part because this appears to be more market rotation than fundamental business issue.

The search giant is coming off a better-than-expected second-quarter report, with earnings per share topping estimates by more than 10%, and revenues climbing above the consensus by about 2%. Better still, sales increased 21% year-over-year — robust growth for what is currently a $650 billion company with an annual top line of $90 billion.

Search remains strong, thought traffic acquisition costs as a percentage of ad revenues did tick higher, from 21% to 22%. YouTube is doing well, and is working on growing its YouTube TV offering. Alphabet’s Waymo business is now being valued at $70 billion by some analysts — a figure that could climb as it makes more advances in the still-budding self-driving industry.

In short, business is good. But the valuation on GOOGL stock could be an issue.

Alphabet and Facebook have been my favorite FANG stocks for some time in part because of valuations. While Amazon and Netflix no doubt will play significant roles in our lives for decades to come (and while I wish I had bought years ago), it’s difficult to get on board when they’re trading at high-double-digit to…

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