We recently compiled a list of 10 High Growth NASDAQ Stocks That Are Profitable in 2024. In this article, we will look at where Alphabet Inc. (NASDAQ:GOOGL) ranks among the high-growth NASDAQ stocks that are profitable.
Malcolm Ethridge, Capital Area Planning Group managing partner, joined CNBC to talk about where the market could go and his sentiment regarding the AI and overall tech sector. While many analysts believe that it will be the small caps that will lead the growth with interest rates easing and the economy slowing down. We recently covered the 8 Most Undervalued Penny Stocks To Buy According To Analysts, where we talked about how Tom Lee, co-founder of Fundstrat Global Advisors likes the small cap in the current market environment. Here's a piece from the article:
Ethridge thinks otherwise, he believes that mega-cap stocks will continue to lead market growth, although not at the same pace as in recent years but still at a steady pace. He attributes this to the ongoing influence of artificial intelligence (AI) on various sectors, including real estate and manufacturing, which are becoming increasingly vital due to rising demands on infrastructure.
Moreover, while explaining why the mega caps will lead the growth, Ethridge pointed out that for the big tech stocks, Fed rate cuts were not necessary as they had significant cash on their balance sheets to reinvest into newer AI ventures. We have already seen Magnificent Seven invest heavily in AI despite the high rate of borrowing thereby leading the bull market in difficult times.
The rate cuts have now made it easy for other companies that didn't have enough cash to borrow and invest in technology. However, he also pointed out that the pace of rate cuts might slow down moving forward, thereby making it hard for small caps to keep up the technology investment race. Ethridge suggests that investors may need to adjust their expectations regarding future Federal Reserve rate cuts.
Moreover, we are also entering earnings season, will the earnings derail the momentum or continue to boost the market? Drew Pettit, Citi Research Director of US Equity Strategy joined CNBC in another interview. He thinks that we are in for a decent quarter, although we are in an expensive market.
While talking about how various sectors will perform, Pettit mentioned that software has the highest bar within tech, meaning its growth expectations are high, yet many software companies are not monetizing effectively. This creates volatility in stock performance. As earnings reports come in, Pettit suggests investors should focus on consumer behavior and credit conditions, particularly in the banking sector, which is expected to perform well this quarter. He also encouraged investors to look beyond the recent quarter earnings into 2025 and 2026, while choosing companies to invest in.
Our Methodology
To curate the list of 10 high-growth NASDAQ stocks that are profitable in 2024 we used the Finviz stock screener, Seeking Alpha, and Yahoo Finance as our sources. Using the stock screener, we got an initial list of major NASDAQ stocks sorted by their market capitalization. Next, we sourced the 5-year net income growth and revenue growth rates for these stocks from Seeking Alpha and the GAAP trailing twelve-month net income from Yahoo Finance. We only selected stocks that had 5-year net income and revenue growth of more than 15%. Lastly, we ranked the stocks by the number of hedge fund holders in Q2 2024 from Insider Monkey's database. The list is ranked in ascending order of the number of hedge fund holders.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Alphabet Inc. (NASDAQ:GOOGL) ranks 3rd on our list of high-growth NASDAQ stocks that are profitable in 2024. It is one of the Magnificent Seven technology companies known for its subsidiary Google.
The company has significant development in artificial intelligence, Google Cloud, and is known for its other products as well including YouTube, Gmail, and Android Operating systems among others. Investors are on the lookout for its autonomous driving venture, Waymo.
While Tesla gets the majority coverage when it comes to self-driving car ambition, however, Alphabet Inc. (NASDAQ:GOOGL) with its Waymo venture has quietly made significant progress. Last week the company announced a significant robotaxi deal with Hyundai, a South Korean automaker. With this multi-year strategic partnership, Hyundai will use the autonomous driving technology of Waymo in 5 of its SUVs for the next 5 years.
Alphabet Inc. (NASDAQ:GOOGL) plans to launch its robotaxis for test drives by the end of 2025 and is expected to deploy a large fleet on public roads in the following years. It won't be wrong to say that Alphabet Inc. (NASDAQ:GOOGL) is leading the robotaxi race as a fleet of around 700 self-driving cars are already operating in major states of the United States including Phoenix, Los Angeles, and San Francisco. The company is testing its services in Texas as well.
If we talk about Alphabet Inc. (NASDAQ:GOOGL) as a whole, the company has been generating significant revenues on the back of its search and cloud segments. The revenue for the second quarter of 2024 was up 14% year-over-year to reach $85 billion. Moreover, the company has generated more than $87 Billion in net income on a trailing twelve-month basis.
Patient Capital Opportunity Equity Strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter:
Overall GOOGL ranks 3rd on our list of the high-growth NASDAQ stocks that are profitable. While we acknowledge the potential of GOOGL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA 'Has Become A Wasteland'.
Disclosure. None. This article was originally published on Insider Monkey.