It’s safe to say we’re living in a digital-driven world. A world where campaigns are no longer broadcast to billboards but to the screens in our pockets. The powerhouses behind this shifting trend? Alphabet and Meta! An advertisement backs every click, like, and video view. All things considered, people continually see their products daily on platforms such as YouTube, Instagram, and Facebook.
Advertisers flock to these platforms because of their cost-effectiveness and high rates of return. Does it not feel like the financials of Alphabet and Meta are skyrocketing right under our noses? But before we get ahead of ourselves, let’s take a closer look at why these stocks are causing such a buzz.
Alphabet: The YouTube Giant
For those who may not know, Alphabet is the corporate titan that owns Google and by association, YouTube. YouTube is arguably the most widely-used streaming platform globally, bombarding viewers with thousands of ads every minute. This alone generates an astronomical amount of revenue for Alphabet.
Looking at the recent quarterly financials from Alphabet, it’s clearly evident that it’s raking in the profits, thanks to a successful advertising model. YouTube ads generated $7 billion for the company, while Google Search came back home with $39.5 billion! The company’s Return on Invested Capital (ROIC) rate averaged 17.5% over the past five years promising strong stock performance, reflecting ROIC over time. Add to the mix 45.7% earnings per share growth in the past year, and it’s easy to see where Alphabet is heading.
Meta: The Social Media Pioneer
Best known for controlling Instagram and Facebook, Meta Platforms also presents an impressive profit margin. According to Meta’s quarterly financials, advertising activities accounted for $33.6 billion out of the company’s total revenue of $34.1 billion—an overwhelming 98.5%!
Just like Alphabet, Meta enjoys low operational costs and high returns. Interestingly enough, the ROIC for Meta also mirrors Alphabet’s at an average of 17.3% over the past five years. However, the past year’s EPS growth for Meta outperforms by a distinct margin: a whopping 174.0%! Is that making your eyebrows raise?
The Future Projection
But enough about the past, let’s analyse the future predictions for these giants. Analysts are bullish on both stocks, with Alphabet expected to see a 15.8% increase in EPS over the next year, along with a projected per-share price of $147.5. This implies an 11.8% upside from today’s prices. It’s a steady yet solid growth.
For Meta, analysts project a 22.7% EPS growth with a price target of $349.5, suggesting a 5.0% rise from its current price. Though seemingly modest, it remains attractive considering its EPS record and future expectations.
It’s important to remember these figures could change, and a healthy investment strategy should not rely on a single insight or prediction. Look out for changes in the market, conduct your due diligence, and keep an eye on other investment opportunities.
As we move further into the digital space, it’s predicted that Alphabet and Meta’s dominion in the advertising arena will only solidify. Advertising is one industry that isn’t going away anytime soon universally. As long as there are products to buy, there’ll be commercials selling them—making companies like Alphabet and Meta invaluable players in any investor’s playbook. Happy investing!
