Google parent Alphabet (GOOGL) has been a buy-and-hold bonanza since it first went public more than two decades ago. Even better, analysts say the frenzy over all things AI gives GOOGL stock more room to run.
Investors knew they had something special with Google when it went public via a Dutch auction (don't ask) back in those innocent days of the early 21st century. The company clearly offered the best internet search product, one that would eventually give it a near-monopoly in that lucrative market.
But Google hardly rested on its search laurels. The company rolled out a steady stream of new products – mail, maps and the Chrome operating system, for example – that extended its reach across the world wide web.
In 2006, the same year GOOGL was added to the S&P 500, the company acquired a quirky startup that allowed users to upload videos to the internet. Critics questioned the wisdom of spending $1.7 billion on what looked to be a fad, but the YouTube deal turned out alright. After all, the business generated $32 billion in ad revenue in 2023, or roughly 10% of Alphabet's entire top line.
Google, now dominant in search and omnipresent on the web, soon set its sights on mobile. When smartphone sales exploded following Apple's (AAPL) release of the iPhone, Google entered the booming segment by creating the open-source Android mobile operating system.
And those are just a handful of highlights from the early days. By 2015 Google was operating so many diverse projects that it reorganized into a holding company called Alphabet.
Today, Google commands roughly 90% of the market for global search, and its Android operating system is found on approximately 70% of all smartphones. Future success, however, is predicated on competing with Amazon.com (AMZN) and Microsoft (MSFT) in artificial intelligence and cloud-based enterprise services. Note too that analysts feel pretty good about GOOGL's prospects in these endeavors.
But before we get to where Wall Street thinks GOOGL stock is going, let's take a look at how it’s performed for the truly faithful over the past couple of decades.
The bottom line on Google stock?
GOOGL stock has been one of the best stocks of all time, according to research by Hendrik Bessembinder, a finance professor at the W.P. Carey School of Business at Arizona State University.
Over its entire lifetime as a publicly traded company, Alphabet generated more than $1 trillion in lifetime wealth creation, which accounts for a stock's increase in market cap adjusted for cash flows in and out of the business and other factors.
How impressive is that? Only Apple, Microsoft and Exxon Mobil (XOM) created more wealth for shareholders, per Bessembinder's findings.
But then retail investors are probably more interested in what a long-term investment in GOOGL stock looks like on a brokerage statement.
Spoiler alert: Alphabet's outperformance has been nothing less than stupendous.
GOOGL stock actually lags the broader market over the past one- and three-year periods, but beyond those time frames the S&P 500 doesn't stand a chance. Over its entire life as a publicly traded company, GOOGL stock has generated an annualized total return (price change plus dividends) of 23.2%. That more than doubles the broader market's total return of 10.6%.
GOOGL's 20-year performance might be slightly less impressive, but it’s been highly remunerative nonetheless. Over the past two decades, GOOGL stock delivered an annualized total return of 19.6% versus 10.7% for the S&P 500.
Have a look at the above chart. You'll see that if you put $1,000 into GOOGL stock 20 years ago, it would be worth about $35,000 today. The same amount invested in an S&P 500 index fund would be worth about $7,650.
Happily for GOOGL shareholders, analysts see plenty more upside ahead for the Magnificent 7 stock. Of the 60 analysts covering GOOGL stock surveyed by S&P Global Market Intelligence, 35 call it a Strong Buy, 13 say Buy and 12 have it at Hold. That works out to a consensus recommendation of Buy, with high conviction to boot.
Indeed, Alphabet is primed to join the rankings of analysts' top S&P 500 stocks.
