Alphabet Inc (GOOG)

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Alphabet, Apple Top 2021 FAANG Stock Performance With More Upside Ahead
By: Investing.com | December 28, 2021

Among the elite group of top five mega cap technology companies dubbed the FAANGs, Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) and Apple (NASDAQ:AAPL) are on track to deliver the best returns to investors this year.

Shares of the digital ad giant and Google search engine parent company are up more than 70% this year, while the iPhone-maker has gained 39%. These performances were pulled off in an environment where many companies faced supply-chain disruptions, labor shortages, and escalating material costs.

The remaining FAANG group members all gained value in 2021, but the performances YTD were not as stellar: Meta Platforms (NASDAQ:FB) is up 28% YTD; Amazon (NASDAQ:AMZN) rose 8%; and Netflix (NASDAQ:NFLX), added 17% so far this year.

Alphabet is on track to cap its best year since 2009, helped by robust demand during the pandemic for its digital ad space from both big and small companies. Alphabet, which makes most of its revenue from Google’s advertising business, has seen a sharp rebound in sales with consumers preferring to shop online during the pandemic.


Alphabet Weekly Chart

As the work-from-home trend continues, the California-based company’s cloud infrastructure business is also expanding, after struggling for many years. In its third-quarter earnings report in October, Alphabet reported a 43% jump in advertising revenue, and a similar increase in YouTube ad sales.

While other ad-based internet companies, like Facebook and Snap (NYSE:SNAP), were hit by the privacy changes to Apple’s iOS, Google seems to be faring much better, thanks in part to its control over the Android operating system and lack of reliance on Apple.

Alphabet: More Room For Growth

As well, Alphabet still has significant opportunity to grow. Its shares should continue to outperform, according to a note from UBS this month. While raising the firm’s price target on the stock to $3,925 from $3,190, analyst Lloyd Walmsley said the Google-parent was UBS’s top stock among internet advertising companies.

The note stated:

“We think Alphabet shares can see positive estimate revisions and multiple expansion on the back of faster-than-expected top line growth and margin inflection at Google Cloud. We think investors are overly dismissive of Cloud’s ability to move the needle based on the relative size of its potential EBIT contribution.”

For the full year, Alphabet sales are forecast to produce the fastest growth since 2007.

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Beyond the FAANGs, Microsoft (NASDAQ:MSFT), NVIDIA (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA) are other tech mega cap stocks that have thus far outperformed the benchmark S&P 500 index in 2021, showing investors’ preference for owning high quality companies with profitable growth track records.

Bottom Line

The dominance of these tech behemoths in 2021 marks a shift from the broad-based recovery that we saw after the market crash in 2020. Investor preference for the top-tier tech companies also indicates they are seeking safety as the Federal Reserve signals interest rate hikes, the pandemic continues to rage, and the global economy struggles amid supply-side bottlenecks.

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