1 Stock I Own and Will Buy More of No Matter What Happens With the Stock Market

Last year was a hard one for investors. The S&P 500 and the tech-heavy Nasdaq Composite Index lost 19% and 33%, respectively, in 2022, marking their worst annual performances since 2008, when the global economy was being ravaged by the Great Recession. 

This year is off to a better start: Both indexes were up nicely in January. However, stock markets are volatile, and regardless of what happens in the near future, I won’t hesitate to load up even more on Alphabet (GOOGL -0.46%) (GOOG -0.63%) shares in particular. Here’s why I like the business so much. 

Look past the recent numbers 

After posting a stellar annual revenue gain of 41% in 2021, Alphabet hit the brakes in 2022, increasing overall sales by only 9.8% for the year. Difficult comparisons deserve some of the blame, as it was going to be extremely difficult to post strong growth on top of 2021’s impressive figure. 

Investors are all too familiar with the other cause: a softer macroeconomic environment. Higher interest rates, elevated inflation, and a recession on the horizon have all seriously hurt the advertising market. A sizable chunk of Alphabet’s total revenue — 78% in 2022 — comes from advertising. So it’s not surprising that this company would be adversely affected as businesses trimmed their ad and marketing spending. 

In the fourth quarter, Alphabet was only able to increase revenue by 1% on a year-over-year basis (7% on a constant-currency basis), continuing a trend of decelerating sales growth throughout 2022. Perhaps even more alarming, the operating margin went from 29% in Q4 2021 to 24% in the latest three-month period. What’s more, YouTube ad revenue declined 8%.

These unfavorable developments help explain why Alphabet’s stock ended 2022 down 39% for the year, as investors focused on the short term apparently soured on the business. 

But there were some bright spots. Google Cloud Platform not only posted revenue of $7.3 billion in the quarter (representing 10% of the total), up 33% year over year, but its operating loss shrank from $699 million in Q3 2022 to $480 million in Q4. And management is fully focused on “rightsizing” the cost structure this year across the entire business, something shareholders should cheer for.

“We have significant work underway to improve all aspects of our cost structure, in support of our investments in our highest growth priorities to deliver long-term, profitable growth,” CFO Ruth Porat said in the earnings press release. A recent announcement to lay off 12,000 employees aligns with these comments. 

Better days ahead 

A single difficult year is hardly enough of a reason to abandon a long-term investing thesis that remains strong. In fact, investors would be wise to consider buying more of Alphabet on the weakness it’s seen over the past year. As of this writing, shares are trading at a price-to-earnings ratio of less than 22, which is cheaper than its three-, five-, and 10-year historical valuation multiples. This means that now might be one of the best times to buy the stock. 

Investor concerns could be warranted, but taking a step back and focusing on the bigger picture makes it clear that Alphabet’s prospects are still incredibly strong. For starters, with ad revenue of $225 billion in 2022, the business commands a 29% share of the worldwide digital advertising market. And while rivals with less of a share, like Amazon and TikTok, are definitely making rapid gains, the global digital ad market is projected to eclipse $1 trillion in 2027, leaving plenty of opportunity for all parties to increase revenue over time. 

And with the amount of data in the world doubling every two years, coupled with the fact that there are still roughly 3 billion people globally who have not yet used the internet, it’s obvious that Alphabet’s position as a gateway to the internet is a powerful and lucrative one to be in. The company will likely continue to be a critical service provider to individuals, corporations, and governments in the years ahead. 

Alphabet’s latest challenges aren’t necessarily specific to its business, and they should prove to be temporary, which should ease investor worries. I still believe that this is one of the best companies on the planet, easily making it a no-brainer stock that investors could buy without hesitation no matter what the broader stock market does.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Neil Patel has positions in Alphabet and Amazon.com. The Motley Fool has positions in and recommends Alphabet and Amazon.com. The Motley Fool has a disclosure policy.