Preparing Your Portfolio for 2025: Two Stocks to Consider
Uncover the Potential of These Two Stocks Heading into 2025
Alphabet: The Search Engine Giant with Enduring Strength
Google's parent company, Alphabet, holds a dominant position in the search engine market. Despite some concerns earlier this year about its grip on this function, it has clearly demonstrated its ability to adapt and thrive. For instance, the implementation of generative AI-powered search summaries shows Alphabet's agility in keeping up with technological advancements. Moreover, its Google Cloud division is experiencing tremendous demand as clients increase their computing power to develop AI models. This division offers a plethora of unique tools, and its popularity and usage have skyrocketed, resulting in a 35% year-over-year revenue increase to $11.4 billion. Overall, Alphabet's third-quarter revenue grew by 15% year over year to $88.3 billion, making it the fourth-biggest company in the world. Despite its impressive performance, the stock is valued at an incredibly low price, trading at just about 22 times forward earnings. When compared to the S&P 500, which trades at 24.6 times forward earnings, Alphabet appears to be a bargain. Investors may see a rally in Alphabet's stock next year as they seek out cheaper stocks with strong growth potential.Alphabet's dominance in the search engine market is not easily challenged. Its brand recognition and user base are vast, providing a solid foundation for continued growth. The company's ability to innovate and incorporate new technologies into its products gives it a competitive edge. As the world becomes more reliant on digital services, Alphabet is well-positioned to capitalize on this trend. Its Google Cloud division is also a key growth driver, with businesses increasingly turning to cloud computing for their data storage and processing needs. The unique tools and services offered by Google Cloud are attracting more and more customers, driving revenue growth. Additionally, Alphabet's focus on research and development ensures that it remains at the forefront of technological innovation, constantly exploring new ways to enhance its products and services.
Another aspect that makes Alphabet an attractive investment is its financial stability. The company has a strong balance sheet and generates significant cash flows. This allows it to invest in new projects and initiatives while also returning value to shareholders through dividends and share repurchases. Alphabet's commitment to shareholder value is evident in its track record of consistent dividend payments and share buybacks. In a volatile market, such stability can provide investors with peace of mind and a sense of security.
PayPal: Transforming and Rebounding
For the past three years, PayPal has not received much attention from the market. Its stock price peaked at over $300 per share in mid-2021 and has been on a downward trend ever since. However, there are signs of a turnaround. Recently, the stock has seen a 50% increase since the beginning of July, indicating renewed interest. PayPal's new CEO, Alex Chriss, joined the company in September 2023 and is leading a transformation. His vision to make the company more efficient and focus on its core strengths has started to pay off. In recent quarters, PayPal's business has shown signs of life, with active accounts increasing slightly and transaction margin ticking up.PayPal's focus on efficiency and core competencies is crucial in today's competitive market. By streamlining its operations and concentrating on what it does best, PayPal is able to improve its profitability and competitiveness. The company's recent improvements in active accounts and transaction margin are a positive sign that its efforts are paying off. Additionally, PayPal's cash flows are being used effectively to repurchase a significant number of shares. In the third quarter alone, it retired 28 million shares, which is nearly 3% of its outstanding shares. This shows the company's commitment to enhancing shareholder value through share buybacks.
Despite the stock's rally, PayPal's stock is still relatively cheap. At the start of the third quarter, it traded at around 12 times forward earnings and 14 times trailing earnings. This presents an opportunity for investors to get in at a favorable price. As the company continues to execute its transformation plan and grows its business, the stock has the potential to appreciate further. PayPal's position in the digital payments space is also a significant advantage. With the increasing popularity of e-commerce and digital transactions, PayPal's services are in high demand. The company's global reach and extensive payment network give it a competitive edge over its rivals. Moreover, PayPal's efforts to expand into new markets and offer new services, such as cryptocurrency payments, add to its growth potential.
In conclusion, both Alphabet and PayPal offer attractive investment opportunities as we head into 2025. Alphabet's dominance in the search engine market and growth potential in its cloud division make it a compelling stock. PayPal, on the other hand, is transforming and showing signs of recovery, with a focus on efficiency and shareholder value. Investors should carefully consider these two stocks and their potential for growth in the coming year.