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How Can I Buy Alphabet Shares On The Stock Market?

May 19, 2020 14:20 UTC

How to buy Google/Alphabet Shares

Google's shares, actually issued by its parent company Alphabet, is one of Wall Street's greatest success stories. The company's two visionary founders managed to establish Google as the world leader in online search due to advantages over competitors such as speed of search and improved relevance of results. Since floating, Google's share price has reflected the company's massive success.

Buying Google shares on the stock market has been a wise long-term investment. Here, we will take a look at why and how to invest in Google stock.

What Is Google Alphabet?

Google was originally started in 1998 as a search engine company by Larry Page and Serge Brin in Silicon Valley, California. Today, Google is not just a search engine but rather a global technology empire. Like the other members of the FAANG Club (Facebook, Amazon, Apple, Netflix and Google), it has diversified by creating other products and services and by acquiring companies with the aim of increasing and retaining its user base and sustaining its growth.

In 2015, Google re-organised itself, creating Alphabet as a holding company for a number of separate activities including Google, which then refocused on its search business. So now, Alphabet is the parent company for Google and a number of other businesses. When we talk about the Google stock, we are actually referring to Alphabet's stock, which has kept its original symbols (NASDAQ:GOOGL)(NASDAQ:GOOG).

Alphabet has one of the world's largest market capitlisations in 2020 and a business model that makes a lot of sense. Buying Google shares may prove to be a real investment opportunity, but short-term risks need to be monitored - both Corona Virus and regulators taking a lot more interest in the company's powerful position and the way it manages customer data.

How Do I Buy Alphabet Shares On The Stock Market?

To buy Alphabet (Google) Shares, you can open an account with a regulated online broker, such as Admiral Markets UK Ltd. Registering with your broker will then give you access to a trading platform, such as MetaTrader 5 (MT5). Then, all you need to do is take these easy steps to invest in Google:

1. Log in to your MetaTrader 5 trading account

2. Right click in the Market Observation tab

3. Go to Symbols and type Google or Alphabet in the search bar

4. Select the title Google and click on Show symbol

5. Right-click on Google stock and click on New Order, then Buy

The trading platform will allow you to:

  • Follow Google's stock price in real time (Alphabet is listed on the US NASDAQ exchange, therefore, real-time share prices are available during the US trading hours)
  • Analyse the variation in the value of the Google shares over time
  • Build a position by buying and selling Google shares
  • Monitor and manage your trading positions in real time
  • Close Gain or Loss Positions

You can benefit from both rising and falling share prices by, respectively, buying or short-selling through CFDs (Contracts For Difference) with just a few clicks on the Trade.MT5 account.

Open a MetaTrader 5 account with Admiral Markets

Shorting Google

To sell the Google stock's CFDs simply follow the same trading steps:

1. Log in to your MetaTrader 5 trading account

2. Right click in the Market Observation tab

3. Go to Symbols and type Google in the search bar

4. Select the Google title and click Show symbol

5. Right click on Google action and click on New Order then Sell

Admiral's Invest.MT5 account allows you to invest in Google and more than 4000 other shares and ETFs (Exchange Traded Funds). The account has many other benefits, including the ability to receive dividends from companies like Google.

Alphabet and Google Have an Evolving Business Model

Google was aware that its search engine would not be enough to sustain its spectacular growth indefinitely. To increase its user base and improve retention, it developed products and services such as Gmail, the Chrome web browser, Maps, the Drive online document storage service and their Translation service.

The monetisation of its business model has been done progressively through advertising with its Adwords and Adsense services. The former specialises in keyword targeted advertising in online search and the latter in advertising space on other websites. In addition, by acquiring YouTube in 2006, Google expanded its market share in online advertising to such an extent that it has become the world leader in this business segment.

Anxious not to depend on advertising, it has also put a foot in new technologies such as Chromecast for wireless streaming, Chromebook for laptops and the Android mobile operating system which is one of its cash cows.

Thanks to the complementary nature of advertising and technology, the company has taken a prominent place in the daily lives of households. In addition, companies perceive it as an excellent means of communication to promote their products and services, thus gaining visibility and better targeting their customers.

Technical Analysis of Google's Stock Price

For this graphical analysis of the Google stock, we will use weekly data, to have a longer Google quote history.

Technical analysis of Google Stock price

Source: Admiral Markets MT5 Supreme Edition - Google CFD #GOOG, weekly chart (between June 16, 2013 and May 5, 2020), made on May 5, 2020 at 17:50. Please note: Past performance is not a reliable indicator of future results or future performance.

Google's upward trend in the stock market started in August 2012 with the upward break of the $650 resistance zone and peaked at around $1228 in February 2014. Shortly afterwards, Google decided to halve its share price (by splitting its stock) in order to make its shares more affordable for smaller investors and more liquid in the market.

This didn't slow the upward trend, with the share's price picking up again to reach a new all-time high in February 2020 at around $1530.

Google's share price then fell back, as part of a general stock market decline induced by the Covid-19 crisis. This fall broke a positive trend line that had been supporting share prices since January 2015. Google's share price then reached a low of around $1009 in March 2020, corresponding in particular to the Fibonacci retracement of 50% of the increase between the January 2015 low and the February 2020 high, and a moving average support zone, where the share price has already rebounded several times in the past.

The rebound that followed is currently back above the 23.6% Fibonacci retracement, also a former resistance zone around $1,290. This break reinforces the upside potential in the medium term, while Google has shown reassuring fundamental prospects for the rest of 2020 (see below). The next upward break will be the all-time high of around $1530 made in February 2020.

Google's share price therefore remains clearly on an upward trend in the medium/long term. Moreover, the 50-week (red) and 200-week (blue) moving averages are firmly on the upside, and prices are moving above them. In addition, the weekly RSI (Relative Strength Index) has rebounded from the 30 oversold zone and climbed above the median level of 50, also suggesting a positive bias.

Google Medium Term Graphical Analysis

Now let's look at Google's more recent price history, focusing on the daily fluctuations of 2019 and 2020.

Medium Term Analysis of Google/Alphabet stock

Source: Admiral Markets MT5 Supreme Edition - Google CFD #GOOG, daily chart (between August 16, 2019 and May 5, 2020), made on May 5, 2020 at 6:10 pm. Please note : Past performance is not a reliable indicator of future results or future performance.

Since the stock market falls caused by Covid-19 in February 2020, the movement of Google's share price has been remarkable. The Google share price lost more than 30% in one month, from the close of February 21, 2020, to its lowest point on March 23, 2020. The movement took place against a backdrop of global stock market declines, where the S&P 500 lost nearly 35% of its value.

Google then rebounded strongly, regaining more than 78.6% of its previous fall, while the S&P 500 rebounded only 61.8% in early May.

Of particular note is the resistance role played by the 50-day moving average (blue) and the 61.8% Fibonacci retracement towards $1,280. The break in this resistance zone caused a sharp upward acceleration in Google's share price on April 29, the day after the publication of its first quarter 2020 results (see below).

This strong break and sharp rise reinforces Google's upward bias, likely to drive it back towards previous highs

Google Alphabet Profits disappoint in Q1 2020, but outlook reassures

When Alphabet (Google) released its first quarter 2020 results, investors were expecting the worst, given the potential impact on advertising of Coronavirus and corporate budget cuts.

However, they were reassured that the economic effects of the Coronavirus pandemic might not be as severe on Google as feared. This led to a sharp rise in Google's after-hours share price, which rose by nearly 10%.

The company reported quarterly earnings of $9.87 per share and revenues of $41.16 billion- a shortfall when compared with analysts' forecasts. However, investors seem relieved by the 13% revenue growth over the same quarter in the previous year.

The stock really started to soar during the company's conference call, where CEO Sundar Pichai and CFO Ruth Porat gave more details on the first quarter and the first two weeks of the second quarter.

While the outlook was not all rosy, the executives promised a "difficult" quarter, they did share some good news.

Porat admitted that there had been a "sharp" drop in advertising revenues in March, but suggested that things would not get worse in April.

"Based on our late March to last week estimates for Search, we have not seen a further deterioration in the percentage decline in revenues year-on-year."

At another point she said that "we're seeing some early signs at this point that users are returning to more commercial behaviour", although she cautioned "it's not clear how durable or monetisable that will be".

Google's direct response ads continued to grow

Direct response advertising on YouTube (also part of the Alphabet group) remained strong throughout the quarter. YouTube advertising revenues were $4.04 billion, an increase of 33% over the previous year. Officials said the strong growth in YouTube revenues persisted until mid-March, when Coronavirus officially became a global pandemic.

Porat noted a performance gap between branded advertising and direct response advertising (which aims to entice viewers to take a specific action, such as visiting a website or making a purchase). While branded advertising slowed, direct response advertising "continued to experience substantial year-on-year growth throughout the quarter.

Confinement encourages massive online engagement

Pichai said that people are relying more heavily on Google's services as travel restrictions change people's behaviour.

Coronavirus research activity was massive, peaking at four times the peak activity during the Super Bowl, he said. The number of downloads for Android applications increased by 30% between February and March and viewing time on YouTube "increased dramatically".

He also said 100 million students and educators are now using Google Classroom, double the number at the beginning of March.

Google search expected to recover quickly

Pichai pointed out that search advertising has a much higher return on investment than other forms of advertising, as advertisers can see exactly what kind of results they are getting and adapt quickly.

Alphabet Controls Costs

The directors of Alphabet have promised to cut staff and capital spending. Overall, investment will see a "modest decrease" in 2020 as the company cuts global office space, slows the pace of buying office buildings and delays construction - Porat said.

She also said the company has adjusted its headcount forecast, which it had previously planned to grow by 20 percent. This deceleration is expected to occur in the third quarter.

Porat also confirmed CNBC's previous report that the company would reduce some marketing budgets. "On the marketing side, advertising and promotion spending, we have reduced it from our plans at the beginning of the year...and as physical events are cancelled for a large part of the year, marketing spending is also being reduced," she said.

Share Buybacks Continue

Porat also indicated that Alphabet's share buybacks would continue as planned, which should help the share price by increasing earnings per share.

"At the beginning of the year, I indicated that we expect to repurchase shares at a pace at least consistent with the fourth quarter on the remaining authorisation, and that remains our view for the second quarter," she said.

Google Financial Analysis

Before investing in Google (Alphabet) shares, it is important to review the fundamentals of the company and take the time to study Alphabet's track record. As Google's parent company, Alphabet's balance sheet not only reflects the company's performance, but also provides information about its future potential through the investments it has made in the development and diversification of the group.

As part of our analysis of Alphabet, below we will cover:

  • Google Revenue Analysis
  • Alphabet's Earnings Per Share Analysis (EPS)
  • Google's Profitability Analysis
  • Google's Cashflow Analysis

Google's Revenue Analysis

Alphabet's revenue is, of course, an important indicator of the health and success of the group but any one year's figure must be put into perspective. In the graph below you will find Google's turnover for the 10 years between 2009 - 2018:

Google/Alphabet Turnover chart

Source: financial data from Alphabet's 2018 10-K filing, chart produced by Admiral Markets

The rapid growth of Google's revenues over the last ten years is largely due to the wide adoption of online advertising. It is difficult to say at this point whether its business model is maturing. If it manages to maintain this pace of growth, its potential remains attractive.

One consequence of Google's leadership position in online advertising is that it is challenging the business models of traditional advertising industry heavyweights such as Publicis, Omnicom and WPP.

Google's EPS Analysis

Google's Earnings Per Share (EPS) is another fundamental piece of information: the company's profit divided by the number of shares. The figure gives you an indication of how much profit the Google shareholder earns for every share he owns.

Google earning per share chart

Source: financial data from Alphabet's 2018 10-K filing, chart produced by Admiral Markets

Google's 2017 EPS shortfall is due to European Union fines for the abuse of a dominant position. These were exceptional items and, otherwise, Google's EPS growth looks very healthy over the last ten years.

Google's Profitability - Margin Analysis and Alphabet Profitability

Google is famous for being one of the most profitable businesses on the planet! Having grown and developed its business model with a comfortable operating margin, we can nevertheless observe an overall decline over the last 10 years.

Is Google's business model in difficulty?

Google/Alphabet Profitability Chart

Source: financial data from Alphabet's 2018 10-K Filing, chart produced by Admiral Markets

The decrease in the operating margin is explained by Alphabet's increase in capital expenditure. Is this a disaster? No. Because the company is investing to build up its future growth drivers in new technologies such as artificial intelligence and cloud-based services.

Google Alphabet Cash Flow Analysis

Since the bursting of the Internet bubble and the numerous bankruptcies that followed at the beginning of the 2000s, cash flow is one element that is under particular scrutiny from technology investors.

Google/alphabet operational cash flow chart

Source: financial data from Alphabet's 2018 10-K Filing, chart produced by Admiral Markets

Google's operating cash flow has grown very healthily over the last 10 years. This means that its business is generating a lot of cash – a sign that shareholders need not worry about Google's financial health despite the EU fines.

The group has also developed many subscription-based services. This will give Google more predictable and steady cash flow in the future.

How to Trade Google Stock?

With Admiral Markets, you can trade on the Alphabet share price using a CFD (Contract for Difference). CFDs allow you to 'bet' on the stock going up or going down and to leverage, ideal for taking advantage of significant short-term movements. Long-term investors can invest directly in shares through the Invest.MT5 trading account, benefiting from commissions as small as $0.01 per share – some of the lowest in the market.

Google's Future Prospects

Google's high quality business and its financial strength are beyond doubt. The graphical analysis also suggests an upward trend.

Google's advertising business may at some point slow down but its strong cash generation allows it to invest in other potential growth drivers, particularly new technologies. However, in those fields it will be competing with other companies and there is no guarantee of future success.

In addition, some technology companies (including Google) are subject to increased scrutiny by government regulators. This could mean that, at some point, Alphabet's share price suffers, despite the popularity of its Google search engine.

Some caution should also be adopted in the short term because of the risk to the economy of Coronavirus.

This aside, Google shares seems to be an attractive proposition that could fit well into a stock market investment portfolio.

Why Invest in Google Alphabet with Admiral Markets

You have several possibilities on how to invest in Google shares. Most individuals go through an online broker to trade shares - or CFDs for leverage and the ability to short sell. Leverage increases the capital invested and makes the stock more accessible to small portfolios. It also magnifies gains and losses.

Admiral Markets offers the opportunity to invest in about 15 financial markets at lower cost through CFDs on the MetaTrader platform, either buying or selling with a level of leverage that suits you. It is wise to use leverage in line with your level of risk tolerance so as not to put yourself in a difficult situation, financially and psychologically.

You can also use our Invest.MT5 trading account to buy Google shares, or any of the 8,000 shares and ETFs available on the world's top 15 stock exchanges!

In addition to equities, Admiral Markets also offers trading in currencies, commodities and bonds.

Open a Live Account with Admiral Markets

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About Admiral Markets

Admiral Markets is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.