Artificial intelligence (AI) stocks have been on a wild ride of late, but one of the steadier hands in the mega-cap AI trade has been Google parent Alphabet (GOOGL), shares of which are higher by nearly 22% over the past month.
A clear spark for the stock has been news that Warren Buffett’s Berkshire Hathaway took a stake in the internet search giant in the third quarter, but there’s more to the Alphabet puzzle and those factors could bring opportunity with the Direxion Daily GOOGL Bull 2X Shares (GGLL ).
GGLL is a geared ETF designed to deliver 200% of the daily performance of Alphabet shares, confirming that this fund is not to be deployed over long holding periods. That’s an important consideration in the GGLL due diligence process, but there are some longer-ranging fundamental factors supporting Alphabet that could boost the case for short-term use of GGLL.
Google Surprisingly Not Pricey
One reason GGLL could get a near-term lift is the fact that shares of Alphabet aren’t as richly valued as some other well-known AI equities.
“For starters, Alphabet still isn’t all that expensive. Even at 26 times earnings, it’s the second-cheapest of the Magnificent Seven, with only Meta Platforms, at 20 times, trading at a lower P/E multiple. The comparison between the two is telling. Both are making gobs of money, and both are spending lavishly on their AI capabilities,” reported Al Root for Barron’s.
Another reason for tactical traders to monitor Alphabet, particularly around earnings season, is the company’s reputation as a profit powerhouse and free cash flow-generating machine.
“Alphabet has been getting more profitable. It grew third-quarter pretax profit by 39% and expanded pretax profit margins by seven percentage points even as it spent $24 billion, up from $13 billion a year earlier,” according to Barron’s.
On the earnings front, analysts expect Alphabet to earn more than $10 a share this year. Should the company be able to add 20% or more to that figure next year, GGLL could be rewarding at various points in the new year. Don’t scoff at the possibility of Alphabet generating robust earnings growth next year, because some analysts believe the company’s cloud unit will notch massive top line growth. Plus, AI can act as fuel to the GGLL fire.
“While it’s difficult to know which AI app will emerge as the winner, Alphabet has demonstrated its ability to generate value in the past—and should be able to in the future, as the launch of Gemini 3 demonstrates,” noted Barron’s.
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