If you are wondering, should I buy Facebook or Google stock, or more precisely Meta or Alphabet stock, we explore the pros and cons in detail here.
Is It Worth It To Buy Google Stock?
Alphabet may have started out as a one-trick pony with the Google search engine, but it has grown over the past few decades to build diversified revenue streams through numerous additional businesses, including YouTube and Google Cloud.
During boom and bust cycles, the predictability of the firm’s revenues from these diverse business units help to cushion the blow of economic slowdowns.
The numerous revenue streams also act as a competitive moat that support the company’s core advertising businesses, Google and YouTube.
Yes, Alphabet has the most popular search engine in the world but perhaps, more importantly, a vast network of websites relies on it for advertising services. It’s virtually impossible for a competitor now to disrupt Google, let alone Alphabet, as a result.
The combination of businesses has combined to create strong financials that generate an abundance of free cash flows, which management can access to invest in new opportunities for growth.
As successful as Alphabet has been, its size is in some ways its biggest hindrance. That’s because the larger Alphabet gets, the more regulators scrutinize it and poke holes in its business strategy, penalizing the firm’s market dominance.
It also faces a harsh competitive environment because almost every strategic move it makes risks a response from titans like Apple and Meta Platforms.
Regardless, Alphabet is likely to sustain its growth trajectory for the foreseeable future. The primary drivers of growth will stem from the digital advertising market, Google Cloud – which is growing fast and a major source of revenues and profits – and the launch of new initiatives that originate from its stealth division.
For investors seeking a company that is likely to continue growing long into the future, Alphabet stands out as a prime candidate with a wide moat. Supporting that bullish thesis are analysts who have a consensus rating of $150 per share on the stock. That’s right in line with our own analysis of cash flows which pegs fair value at $149 per share.
Is Facebook a Good Stock To Have?
When Mark Zuckerberg started the business that ultimately became Facebook in his dorm room, he admits he never dreamed that he would one day oversee the technology giant Meta Platforms has become today.
Facebook is the de facto standard when it comes to social media platforms and it’s no surprise why given its large and growing user base of over 3.59 billion people.
By capturing such a substantial portion of the entire world’s population, Meta Platforms has built an advertising business that powers the majority of its revenues. The company’s engaged user base spends on average about 35 minutes daily on the Facebook app alone.
With so much human attention focused on Facebook and indeed Instagram, also owned by Meta Platforms, Zuckerberg has succeeded in building sticky, cutting-edge products that have transcended geographies and languages.
He also made the brilliant move of purchasing Whatsapp, which meant voice conversations could be used to serve ads across the company’s primary sites: Facebook and Instagram.
Like Alphabet, Meta Platforms suffers from its own dominance. The European Union in particular has targeted Meta Platforms over privacy concerns. Nevertheless, Zuckerberg has succeeded in building a highly skilled talent pool that has navigated regulatory, business, and financial hurdles since inception. So too has the company succeeded facing head-on the threats from Amazon and Alphabet.
As a result, analysts have maintained a positive bias with 52 analysts placing a consensus $362 per share fair value target on the Meta Platforms. Our own analysis is slightly more conservative, and has Meta’s intrinsic value closer to $348 per share. Either way, there is plenty of upside left for Meta Platforms if it realizes its full value.
The drivers that could help it reach those levels are continued growth in the advertising market as well as the launch of new services.
While its metaverse initiative didn’t pan out as originally planned, Zuckerberg and his team are constantly innovating and looking for new up-and-coming companies to acquire; Instagram, Whatsapp and Oculus were all acquired by Meta Platforms.
Facebook Vs Google Stock: Which Is Best?
For investors to choose between Facebook vs Google stock, or more precisely between Meta Platforms and Alphabet is no easy feat.
Both companies enjoy wide moats and diversified revenue streams from numerous business divisions. If the decision were boiled down to valuation, Meta Platforms currently has upside of 13.1% to fair value of $341 per share while Alphabet could potentially rise by 9.1% to $150 per share.
However, the reality is both businesses are worthy of just about any investor portfolio, and buying one or the other may not be as smart as splitting the difference and owning a portion of each.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.