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Many tech stocks rose in 2023 due to the rise of artificial intelligence (AI).Among them are alphabet (GOOG -0.47%) (Google -0.48%)uses AI across many products, including the ubiquitous Google search engine.
Alphabet’s fortunes flipped from a 52-week low of $84.86 last January to a 52-week high of $142.68 by the day after Christmas. So what’s in store for us in 2024?
Well, the new year is already shaping up to be an interesting one for the company. Alphabet could face significant upheaval in 2024, and these factors could influence the decision to invest in Alphabet. So it’s wise to consider these events to determine whether Alphabet is the stock to buy in the new year.
Alphabet “Chromagedon”
One key factor that could impact Alphabet stock is the company’s decision to phase out third-party cookies from its popular Chrome web browser. These cookies are used by advertisers to target digital advertisements based on your activity on the internet, including the websites you visit.
This online tracking has raised concerns about consumer privacy. So Alphabet decided to move away from third-party cookies, eliminating the current targeting mechanisms that advertisers rely on.
This is so big that many in the advertising industry are calling the end of third-party cookies “Chrome Ageddon.” Because Chrome is the world’s top web browser, accounting for about 64% market share. appleThe Safari browser is in second place with a 20% share.
Alphabet will begin a multi-month process to phase out third-party cookies in the first quarter of 2024. The company is moving his Chrome to Privacy Sandbox, a system developed by Google.
Privacy Sandbox limits the sharing of information about your online activities with third parties. Instead, your data remains on your device and is accessed by the websites and apps you visit to serve you ads tailored to your interests. In this way, Privacy Sandbox attempts to balance the needs of consumers and advertisers.
It also means Alphabet will have oversight over the data it collects from Chrome users, giving advertisers a strong incentive to continue spending their budgets with the company. Advertising accounted for $59.6 billion of Alphabet’s $76.7 billion in third-quarter revenue, so it’s important that the transition to the privacy sandbox is successful.
A privacy sandbox could strengthen Alphabet’s financial moat in the digital advertising industry. After all, advertisers will have a hard time skipping advertising on the company’s globally popular products, including Google and YouTube.
Another 2024 challenge for Alphabet
However, Google’s search engine dominance attracted the attention of the US Department of Justice, which filed an antitrust lawsuit against the company. The lawsuit focuses on Alphabet’s payments to companies such as Apple to make Google the default search engine on its platform.
The trial is ongoing, with closing arguments scheduled for May. The consequences could range from fines to forcing Alphabet to restructure its business.
Alphabet recently lost another antitrust case related to the Android mobile app store. But these sales are just a portion of Google’s other non-ad revenue, with his $8.3 billion in third-quarter revenue compared to his $44 billion in search engine ads served by Google. far below.
But the lawsuit against Google’s search dominance may not bring doom and gloom. microsoft The company faced a similar antitrust lawsuit in 1998 over payments to Internet service providers to promote the Internet Explorer browser. The company reached a settlement. Since then, Microsoft’s stock price has increased year after year.
So if Alphabet can also reach a settlement in its antitrust case, its business could continue to prosper in the long run. The company’s performance was strong, with third-quarter sales of $76.7 billion, an 11% increase over the same period last year.
Alphabet stock decision
Alphabet’s transition away from third-party cookies and antitrust lawsuit against Google could make the stock price volatile in 2024. Still, over the long term, Alphabet remains an attractive growth investment.
Sales in the third quarter were up 11% year-on-year, complemented by a strong financial position. The company’s total assets in the third quarter were $396.7 billion, of which $119.9 billion was cash, cash equivalents, and securities. Compare that to $123.5 billion in total debt.
Additionally, Alphabet is benefiting from the rapidly growing global digital advertising industry, which is estimated to grow from $680 billion in 2023 to $966 billion by 2028. The company also has other growth engines, including its cloud computing business, Google Cloud.
AI now offers Alphabet new avenues for revenue growth. The AI industry is predicted to grow 20 times by 2030. As such, it makes sense to buy and hold Alphabet stock for the long term, as price changes in 2024 may pale in comparison to the company’s long-term earnings growth opportunities.
Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Robert Izquierdo has held positions at Alphabet, Apple, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Apple, and Microsoft. The Motley Fool has a disclosure policy.
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