There might be more glamorous members of the Magnificent Seven, but Google parent Alphabet (GOOGL) is delivering glamorous and magnificent returns in its own right this year. As of November 6, the internet search giant was higher by 51.42% YTD.
With a market capitalization of $3.43 trillion, which is breathtaking, Alphabet has some room to ascend before reaching the top of the Magnificent Seven spectrum. Alone, that could imply opportunity is abound with the Direxion Daily GOOGL Bull 2X Shares (GGLL ). That ETF is designed to deliver double the daily returns of Alphabet. But there’s more to the story.
Internet advertising is the linchpin of Alphabet’s revenue stream. But the company has a diversified portfolio of businesses. Some of them are expected to be — and some already are — fast-growing top-line contributors. Those include AI and cloud computing. And that indicates Alphabet has the potential to generate the headlines needed to bring instruments like GGLL into focus.
“We see the firm’s investments in AI as a continuation of this effort to safeguard its core product, Google Search,” noted Morningstar analyst Malik Khan. “We believe that by leveraging generative AI, Google can not only improve its own search quality via features such as AI overviews, but also improve its advertising business by augmenting its ability to target customers with relevant ads.”
Alphabet Fundamentals Bode Well for GGLL
Undoubtedly, GGLL is a short-term trading tool, not a long-term investment. But the ETF can benefit from Alphabet’s array of impressive fundamentals. Those include its status as one of the most cash-rich companies in the U.S., confirming it’s a prodigious generator of free cash flow.
Headlines related to cash flow increases — something at which Alphabet is adept — could spur interest in GGLL. Likewise, the Direxion ETF could get a lift from positive commentary around Alphabet’s expansion efforts outside the internet advertising space.
“Beyond search, we have a positive outlook on Alphabet’s cloud computing platform, Google Cloud Platform,” added Khan. “We believe increased migration of workloads to the public cloud and an uptick in the deployment and usage of AI are key growth drivers for GCP over the next five years. At the same time, we believe that as GCP scales, it will become a more important part of Alphabet’s overall business, both from a top-line and profitability perspective.”
Perhaps further fortifying the case for occasional use of GGLL is the point that Alphabet itself as well as Google internet search and YouTube are wide moat businesses, according to Khan.
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