Google’s parent company Alphabet (NASDAQ: GOOGL) released its earnings results after the US market closed yesterday. Although revenues in every sector showed growth, figures across the board missed analysts’ expectations. With that in mind, should I still buy Alphabet stock?

Snapping back

With Alphabet missing both its top and bottom line consensus, I was surprised to see the stock pop as high as 5% in after-hours trading. There could be several reasons for this. However, I’d attribute it to the increase in advertising revenue despite Snap’s lacklustre Q2 earnings last week, which warned of lower ad spend last quarter.

Having said that, all of Alphabet’s core businesses saw growth on a year-on-year (Y/Y) basis. These figures defied the doom and gloom Snap posted in its earnings report, which spooked the stock market into a sell-off.

Vision for the future

So, with an increase in its top line, why did the Nasdaq-listed firm see a decline in its EPS? The two main culprits were higher labour costs and further investments in tech. CEO Sundar Pichai said the tech giant is planning to continue heavily investing in developing its offerings.

The latest AI-integrated search features are already showing promise, as Multisearch and Google Lens have seen increasing levels of adoption among users. The feature brings up relevant information related to objects it identifies using visual analysis. This allows people to use text and images at the same time, while giving users the ability to ask questions about what they see.

On the YouTube front, Alphabet announced a partnership with Shopify last week. This collaboration enables Shopify merchants to feature their products across YouTube channels and content. And with YouTube Shorts continuing to grow fast, this feature could help to monetise it.

As for Cloud, I was happy to see revenues continuing to hit fresh highs. Pichai confirmed that demand for the service remains robust, with more enterprises expected to come on board as new features get added. The acquisition of Mandiant that’s expected to be completed by the end of the year should also help with this. As the bulk of the company’s capital expenditure went towards servers and data centres, I’m confident in Cloud’s long-term earnings potential.

Returning for more

Although such developments excite me as an investor, I’m well aware of the risks associated with investing in Alphabet. There’s the obvious macroeconomic headwind that’s expected to dent ad spend in the near term. This was confirmed by CFO Ruth Porat on the earnings call.

More worrying is the rise of TikTok. Google exec Prabhakar Raghavan admitted around 40% of Gen Z users prefer searching via TikTok or Instagram over Google. If it fails to improve its search features or win over users, Alphabet’s core business could be compromised.

Yet, I have confidence in this experienced team to continue developing its products and services, and fend off competition. The board has shown its ability to return value to its investors time and time again.  In fact, Q2 hosted the biggest share buyback in the company’s history. Therefore, I remain bullish and will look to buy more Alphabet stock for my portfolio while it’s cheap.

The post Should I buy Alphabet stock after its Q2 earnings? appeared first on The Twelfth Magpie.

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John Choong owns shares of Alphabet (Class A Shares). Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares), Alphabet (C shares), and Shopify. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Alphabet (NASDAQ: GOOGL) share price just ‘lost’ 95% of its value today. The stock was trading above the $2,200 mark on Friday but is now trading just above $110. Here’s why, and whether I’ll be buying Alphabet stock for my portfolio.

Heading Dow-wards?

The sole reason for the drop in the Alphabet share price is its recent 20-to-1 stock split. Those who held the stock when the US market closed on Friday were awarded 19 additional stocks for every stock they held. The value of each stock has been divided by 20 as well.

According to the board, the reason for this split is to encourage higher trading volume while making access to Alphabet stocks easier. However, this is a double-edged sword. While a ‘cheaper’ stock encourages more volume to boost its share price, it also means that it’s more vulnerable to being shorted and driving the share price down. This is a genuine risk considering the negative sentiment surrounding the current bear market.

Nonetheless, the main prospect from the stock split is Alphabet’s potential entry into the coveted Dow Jones index. The index includes 30 of the most prominent companies listed on US stock exchanges. Given Alphabet’s prominence, analysts are predicting it’s a matter of when and not if the NASDAQ-listed firm gets inducted. If this happens, I expect the Alphabet share price to rally, as institutions tracking the index will have to purchase the stock.

What now?

Despite the excitement surrounding its stock split, the Alphabet share price is still down 20% this year. Fears of a recession have led investors to speculate that growth in advertising spending, Alphabet’s main source of revenue, will stall. As such, analysts’ earnings per share (EPS) estimates have seen downward revision over the last 90 days.

Alphabet’s stock plunged after it reported its Q1 earnings results, as some key figures fell short of analysts’ expectations. Slowing advertising spending from the Russia-Ukraine conflict along with currency headwinds were some of the reasons cited by management for the underperformance. But with Alphabet set to report its Q2 results next Tuesday, I’m hoping that there will be better news. EPS is expected to come in lower than a year ago. But I’ll be paying close attention to the guidance provided, in hopes the group is on track to achieve 15% revenue growth for the year.

Searching for profits

Alphabet stock is currently the largest holding in my portfolio, so should I be buying more? Well, the company has a flawless set of financials to begin with. A 5.1% debt-to-equity ratio and a mountain of cash ($134bn) puts it in an excellent position to grow and withstand an economic downturn. Additionally, it boasts high-quality earnings with excellent growth prospects from its latest developments. These include YouTube Shorts, Google Cloud, Google Workspace, Waymo, and even an improvement to Google Search.

So, with an average price target of $158.98, this gives the current Alphabet share price a 40% upside. As such, I’ll be looking to buy more of its stock as I believe Alphabet has the potential to substantially increase my wealth in the long term.

The post What just happened to the Alphabet share price? appeared first on The Twelfth Magpie.

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John Choong owns shares of Alphabet (Class A Shares). Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares) and Alphabet (C shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Alphabet (NASDAQ: GOOGL) share price is down 20% this year. Nonetheless, it has managed to outperform its index, the Nasdaq. With a number of groundbreaking features implemented to the Google search engine, and a 20-to-1 stock split coming up, the Alphabet share price could be about to rally.

Searching for direction

Alphabet is the market leader in the search engine and advertising field, by way of Google. Even so, it continues to innovate its product and service offerings. CEO Sundar Pichai introduced a multisearch feature at the company’s latest annual general meeting (AGM). The feature gives users the ability to search with images and text simultaneously. Additionally, Alphabet incorporated scene exploration into Google, which gathers insights about multiple objects within images, with local information for search being added as well. For example, this allows users to search for a product in the area.

Not only do these new features generate a much better experience, but it also allows for a better connection to form between users and merchants. As a result, this should improve advertising revenue for Alphabet.

Split coming up

At Alphabet’s latest AGM, shareholders finally approved the 20-to-1 stock split. The split doesn’t change the company’s financial position, but it does encourage an increase in trading volume. This makes the stock more accessible to investors, as its current $2,200 price tag makes the stock look expensive.

A cheaper-looking stock also makes Alphabet more lucrative to institutions and investors. One of these is Warren Buffett, who has made no secret of his regret at not buying Alphabet stock. Perhaps this could be an opportunity for the Oracle of Omaha to purchase a position in one of the world’s biggest companies.

Moreover, the reduced price tag will most probably get the tech stock into the Dow Jones index. This would result in a large volume of institutional buying, thus increasing the Alphabet share price. In the past, stock splits at big companies have often been preceded by rallies leading up to the split. So, if Amazon‘s latest run up to its stock split is anything to go by, Alphabet shares may be in for a rally.

Growth rally

While Alphabet narrowly missed earnings expectations in its Q1 results, this was down to an increase in R&D spend. This was shown in the company’s AGM, as improvements made in Google Maps, Google Assistant, Google Cloud, Google Workspace and other bets were on display. Therefore, I expect these improvements to have a positive impact on usability and future revenue.

With a forward price-to-earnings (P/E) ratio of 20, the Alphabet stock looks extremely lucrative to me. A market leader with healthy growth prospects and a flawless balance sheet are perfect traits I look for in a company whenever I invest.

It’s also worth mentioning that Alphabet has an excellent record of having a high return on capital employed. This gives me plenty of confidence as an investor. As such, with its share price at a 1-year low, I’ll be looking to buy more Alphabet shares for my portfolio.

The post Is Alphabet stock about to rally? appeared first on The Twelfth Magpie.

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John Choong owns shares of Alphabet (Class A Shares) at the time of writing. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares), Alphabet (C shares), and Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Golden opportunity?

Given the wild swings for stocks and lower cash value from high inflation, the casual observer might have expected gold to do well. On the contrary, this week saw gold trade at its worst levels since February. This was due to the strength of the US dollar, as it hit a 20-year high, rebuffing views that the greenback is a dying dinosaur. While both gold and cash offer more safety than equities, gold has underperformed the stock market over most time periods. As such, I feel the golden opportunity isn’t investing in gold, but rather in the stock market over the long term.

There’s been lots of noise but no real direction as to whether the falls are a great buying opportunity, or just the first step in a much more serious bear market. If inflation remains high, further rate rises look inevitable. This is bad news for property, equities, and bonds, especially if paired with an economic downturn. Despite that, it’s worth noting that although the stock market seeing plenty of red lately, history’s on its side. Since its inception, the US S&P 500 has rebounded from every single market crash, for instance.

Time in the market is better than timing the market

Many investors seek to time the market by finding a bottom before investing. Unfortunately, it’s very rare that this actually works. The best-known investor globally, Warren Buffett, once said: “I haven’t the faintest idea what the stock market is going to do when it opens on Monday.” More often than not, investors have to suffer a little bit of pain before seeing a return on investment. Be that as it may, being patient is easier said than done. It’s never easy investing your savings only to watch them lose half their value. Hence why it’s crucial to pick the right stocks.

Picking the right stocks

That brings me on to how to do that. Do your due diligence — that’s the most important thing before investing in the stock market. Like the oracle of Omaha, I follow a strict checklist before purchasing stocks. I look for:

• Solid fundamentals (Low debt and healthy cash levels).
• A company with pricing power or high margins.
• Great earnings potential.

These qualities sound simple, but they’re more difficult to find in many companies than not. Nonetheless, one such company that exhibits all these traits is Google owner, Alphabet. The mega-cap boasts an excellent balance sheet, healthy margins (30%), and great earnings potential through the development of its many offerings. Nevertheless, its share price is down 20% this year as the firm came in short of earnings expectations and future underperformance remains a risk. However, I’ll be capitalising on its lower price to add to my Alphabet position.

The post My 3 best tips on how to invest in today’s stock market appeared first on The Twelfth Magpie.

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John Choong owns shares of Alphabet (Class A Shares) at the time of writing. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares) and Alphabet (C shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Alphabet (NASDAQ: GOOGL) reported earnings for its Q1 2022 results yesterday evening. Since then, Alphabet shares have taken a tumble as earnings missed analysts’ expectations. They’re still up a few percent over 12 months though. However, amid the latest sell-off, here’s why I’ll be buying more shares of Alphabet.

(Y) is everyone overreacting?

Although revenue came in at $68bn, matching the 23% growth estimates, earnings per share (EPS) underperformed. Analysts had been expecting EPS of $25.60, but were disappointed when the headline number came in a dollar lower.

Aside from that though, everything else in the earnings report was actually rather decent. Google’s biggest revenue driver in Search grew by 24% as it benefited from an uptick in retail and travel-related searches. Additionally, Alphabet managed to retain its stellar operating margins of 30%, undeterred by inflationary pressures.

So, if revenue grew and operating margins remained steady, where did all the earnings go? Well, the answer lies in the conglomerate’s cash flow statement. CFO Ruth Porat disclosed that the company spent £9.8bn on long-term investments such as property, technology, equipment, servers, and talent. This is the most the S&P 500 company has ever spent on Capex, showing that Alphabet has used this quarter to innovate its offerings.

Hey, Google. What’s the weather like today?

Cloudy, with a chance of sunshine — that’s my key takeaway from Google Cloud’s performance. Despite Cloud revenue growing 44% year on year at $5.8bn, there was a slowdown in growth from the last quarter as losses widened. Google Cloud is a business that Alphabet views to be potentially as lucrative as Search, hence why it’s heavily investing in it. Management continues to aggressively invest in its Cloud segment through global infrastructure, cybersecurity, and data analytics. I’m expecting this move to bring in more customers over time, as demand for safe and efficient cloud computing increases.

Guidance was also fairly positive. Tailwinds from hybrid working habits continued to push Google Services higher as revenue for the segment came in at $61.4bn. While YouTube’s growth took a hit, its short-form offering secured 30bn daily views in Q1. This was four times higher than in the previous year. In fact, time spent on YouTube continued to grow, shrugging off worries about TikTok taking users away.

Given that Russia only accounts for 1% of revenues, sanctions shouldn’t affect the firm’s earnings too drastically. Nevertheless, it’s worth noting that European advertisers pulled back on advertising in March due to the conflict.

Alphabet That

Alphabet has an excellent record in generating healthy returns on capital employed (26.7%). With that in mind, an EPS miss is not my biggest concern. Especially when earnings was spent on investments to secure bigger returns in the future. Pair that with a $70bn share buyback programme (5% of its publicly available shares), and this is yet another masterclass of capital allocation from Ruth Porat.

With a free cash flow of $15.3bn and a debt-to-equity ratio of 5.8%, Alphabet is in an extremely healthy position to bring shareholders value for the long-term future. I’m confident that it’s only a matter of time before the tech giant bounces back. As such, I’m buying more shares for my portfolio.

The post Alphabet shares tumble after earnings miss. Here’s why I’m buying more appeared first on The Twelfth Magpie.

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John Choong owns shares of Alphabet (Class A Shares) at the time of writing. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares) and Alphabet (C shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Going b(A)ck to (B)asi(C)s

Google’s parent company, Alphabet (NASDAQ: GOOGL) is one blue-chip that cannot be ignored. The conglomerate has a track record of beating the S&P 500, and produces stellar returns with a 30.2% return on equity. Alphabet earns the bulk of its revenue from advertising and search.

Its cloud segment is also starting to gain momentum as it races towards profitability. Given the firm’s dominance in these rather monopolistic industries, I believe Alphabet has what it takes to continue growing while holding a defensive position in my portfolio.

The blue-chip boasts an extraordinary balance sheet with close to zero debt and huge sums of cash. Its profit margins are that of a mining company, currently standing at close to 30%. With such an excellent track record and a forward price-to-earnings (P/E) ratio of 22, I’ll definitely be buying more shares. Although this evening’s earnings report could disappoint, I’m confident in Alphabet’s ability to generate long-term returns.

Dune forget Dunelm

One of Britain’s biggest homeware retailers, Dunelm (LSE: DNLM) has been largely overlooked since Covid restrictions were lifted. Many thought that the stock would dip as consumers opt to spend money outside of their homes. However, the blue-chip continues to impress. Its most recent earnings report showed a a 25% increase in its earnings, and total sales were up 10.6% year over year.

Even though recent GDP and retail sales numbers were lacklustre, Dunelm remains strongly positioned. The fine print within the retail sales figures showed that household goods stores saw a 2.6% increase in sales. With Dunelm’s 8.5% increase in active customer growth to go with that, the firm has strong pricing power to battle the inflationary storm. A forward P/E ratio of 13 and a decent dividend yield of 3% makes this stock an intriguing one to look out for, once the next set of retail sales data is released.

A saucy dip for this blue-chip

Rio Tinto (LSE: RIO) is one of the world’s largest iron ore miners. Its share price has taken a tumble due to recent disappointing Q1 production numbers and lockdowns in China. While I do expect the share price to continue dipping, I reckon there may be a buying opportunity sometime in May and beyond.

Mining companies are notorious for, “Using windfalls to dig more materials out of the ground. And the opposite is true when prices hit rock bottom. Production is reigned in and cash is conserved. These are the supply forces that self-regulate commodity cycles”, as FreeTrade analyst Paul Allison states.

Therefore, the blue-chip will eventually have an influx of demand for iron again, driving iron prices back up. This should happen once China eases its Covid restrictions. Buying shares before this occurs could possibly see my portfolio getting a bumper gain. Moreover, a 10% dividend yield could see me earning a little bit of passive income while waiting for iron ore prices to climb.

The post 3 blue-chip shares I’d buy in May appeared first on The Twelfth Magpie.

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John Choong owns shares of Alphabet (Class A Shares) at the time of writing. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares) and Alphabet (C shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A strong economy

The next US Federal Reserve meeting is expected to mean a 50 basis points hike in the Fed funds rate. This is equivalent of a 0.5% interest rate hike and has sparked fear of a still-bigger stock market correction. The Fed has a history of being too hawkish and spurring recessions, which affects markets globally, including here in the UK. Nonetheless, Moore thinks that the US economy is strong enough to handle multiple rate hikes this year. This is backed by strong employment numbers, heavy assets, and positive earnings results. He also believes inflation is close to reaching its peak. Nonetheless, oil remains the biggest issuing affecting consumer prices. The black gold could spark chaos again if it spikes above $100 per barrel.

Moore sees this year’s stock market correction as being short-lived due to the positive economic data coming in. He expects new market highs to come at some point next year. This should happen once inflation cools down and supply chain bottlenecks ease. Unfortunately, that’s where his bullishness ends. He thinks those new highs could be followed by a potential recession soon after, and into early 2024. This is most likely to happen once ‘stagflation’ (High inflation, but slow or no real economic growth) starts to take effect.

Time is my best friend

Will all that deter me from investing? No. There are four cycles in investing — accumulation, mark-up, distribution, and legacy. This was mentioned by Moore in my interview with him. As a young investor, I’m currently in the accumulation phase. This phase is where I see buying opportunities with attractive valuations during a bear market. Moore sees the current US market correction as a buy-the-dip opportunity for me, as I begin to pick up good discounts on mega-cap companies with healthy balance sheets, attractive margins, and pricing power. The tech-heavy Nasdaq in the US is down over 12% so far this year. That presents plenty of opportunities for me to buy shares in big US-listed tech companies such as Amazon, Alphabet, and Microsoft.

My buy the dip strategy

As Warren Buffett once said: “A diversified portfolio with exposure to different sectors is protection against ignorance.” This same advice was alluded to by Moore in our interview. The main takeaway was for me to invest more in a variety of value and dividend stocks. These can include commodities, insurance, and healthcare.

I was also pleasantly surprised to find out that Moore follows a similar buying strategy to mine. And he continued to encourage me to buy the dip. This means buying when I see around a 5% to 10% decline in a specific stock. When I asked him how much cash I should be leaving on the side to buy those dips, he mentioned 15-20% of my investment portfolio.

Ultimately, my purchases would be dependent on my risk assessment during any market fall, of course. But I will be buying the dip in mega-cap companies with excellent fundamentals for my portfolio.

The post Should I buy the dip in this stock market correction? appeared first on The Twelfth Magpie.

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John Choong owns shares of Alphabet (Class A Shares) at the time of writing. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Microsoft. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

What does the yield curve have to do with a recession?

An economic recession is typically defined as two straight quarters of negative gross domestic product (GDP). This means that the economy is contracting. Many analysts point towards the yield curve inverting as an indicator of an impending economic decline. After all, it has ‘predicted’ seven of the past eight recessions. The yield curve is an indicator of returns from government bonds. These bonds have a maturity date that can range from 1 month to 30 years. Wall Street normally sounds the alarm whenever short-term bonds (2-year) yield a higher return than long-term bonds (10-year), thus inverting the typical yield curve. Investment banks such as Deutsche Bank and Goldman Sachs have even predicted a recession based on this.

Cherry picking

I believe the data surrounding the relationship between the yield curve and an economic recession has been cloudy. Among all the times the yield curve has inverted in the last 30 years, a recession only preceded it three times. As such, I do not believe that three, or even arguably two data points constitutes good statistics. It is worth noting that the 2020 recession was caused by a global pandemic. Going back further, the yield curve had also inverted in 1995, 1996, and 1998, with no recession following. While it is common for a recession to follow after the inversion of a yield curve, it is not absolutely indicative of it.

Current economic data remains healthy and robust. The unemployment rate continues to decline while labour participation heads back to pre-pandemic levels. In addition, PMI numbers continue to expand, and spending patterns continue to show that consumers are in good shape. Most importantly, GDP continues to grow despite high inflation. Therefore, I think the economy is in a strong enough position to absorb the impact of rate hikes by the Fed, although an overly aggressive Fed might spark a recession.

Investing in a safe bet

While I do not know whether a recession will or will not materialise, I do know that Warren Buffett’s investing philosophy has been effective in generating healthy returns over the long term. I will continue to invest in companies with solid fundamentals, strong earnings, and potential for growth. I believe Alphabet checks all these boxes. It has a hybrid nature of being a defensive and growth stock. Its monopoly in the search and advertising space means that although revenue will take a hit, its position in the market is unlikely to get compromised. It also has tremendous earnings potential in an increasingly inelastic service, cloud computing. So whether a recession happens or not, I will continue to invest in companies that have strong fundamentals, such as Alphabet.

The post Here’s why a recession might not actually happen appeared first on The Twelfth Magpie.

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John Choong owns shares of Alphabet (Class A Shares) at the time of writing. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares) and Alphabet (C shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A new tax year starts on 6 April, and with it comes a renewed £20,000 ceiling that I can invest in my Stocks and Shares ISA. So, here are the three best stocks I’m buying to try to beat the market!

Stock pick #1 – Alphabet

Warren Buffet has always said that the best companies are those that exhibit solid fundamentals, strong earnings power, and the potential for continued growth. Alphabet (NASDAQ: GOOGL) manages to tick all these boxes. With a strong balance sheet, a 29.5% profit margin, and plenty of room for earnings growth with some analysts predicting a 22% upside to its current share price, the Google-parent stock is a no-brainer for me. Furthermore, despite having legal challenges as a big tech company, Alphabet has a history of outperforming the S&P 500. Its upcoming stock split this summer could work wonders for the share price as well. History has shown that stock splits tend to boost share prices as they encourage higher trading volume. Therefore, a solid balance sheet accompanied by strength in the search engine and advertising space makes Alphabet a hybrid defensive-growth stock for my Stocks and Shares ISA.

Stock pick #2 – PayPal

Although the PayPal (NASDAQ:PYPL) share price is 60% off its all-time-high, I think the fintech company still has plenty to offer. Despite a miss on its earnings last quarter, I am excited by PayPal’s revised business model. The platform is targeting more activity per user rather than more users. This is music to my ears because I value quality over quantity. Its partnerships with Amazon, Starbucks, and Doordash to integrate Venmo, an American mobile payment service it owns, will also provide a boost to its revenue. Its previous partnership with eBay generated a sizeable portion of revenue, showing me that PayPal has had some historical success. It could, however, suffer the effects of a high interest rate environment as transaction volume could slow down. Despite its interest income segment earning it revenue, it might not be sufficient to keep investors happy. Yet it’s also hedged against such a potential slowdown. The firm’s interest income segment hedges against rate hikes as it stands to earn revenue from interest too.

Stock pick #3 – Astra Space

Next up on my list is Astra Space (NASDAQ: ASTR). Astra sends small rockets into space to deliver satellites and other payloads for its commercial customers. As a pre-profit company, Astra carries a high level of risk, but with it also comes a high potential upside to its current share price. Since the Alameda-based company launched its first successful payload in March, the share price has shot up 21%. With more launches lined up and monthly launches planned for the rest of 2022, there could be room for the share price to continue growing. Astra also boasts a flawless balance sheet with zero debt, adequate cash levels, and a healthy cash burn. This gives me plenty of confidence to continue buying Astra shares as there is a low probability that the company will need to raise capital in the near future.

No dividends

These are all growth stocks with no official dividends. Nevertheless, the potential upside to the stocks’ share prices offsets the growth of regular dividend-paying stocks, in my opinion. This is why I’ll be buying all three stocks for my portfolio.

The post My top 3 picks for my Stocks and Shares ISA! appeared first on The Twelfth Magpie.

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John Choong owns shares of Alphabet (Class A shares), Astra Space, and PayPal at the time of writing. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares), Alphabet (C shares), and PayPal Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

So, clearly, these results left Meta investors feeling gloomy, but I think this dip in share price could be an opportunity for me to add the stock to my portfolio. Let’s take a look at why.

Meta concerns

While I see value in the current Meta share price, I do have some concerns. One of these is the potential decline in popularity that Facebook, a site owned by Meta, may be experiencing. The latest results showed a drop-off in daily active users, the first time in the firm’s history. And this is more than likely a result of the rise of competitor sites such as TikTok. This may be a reason for Meta’s weak forecast for future growth.

Also, and as mentioned by my fellow Fool Edward Sheldon, another issue for the company is the recent changes to Apple’s privacy policy. Impacting Meta’s ability to offer targeted advertising, it is believed this will cost the firm around $10bn in advertising revenue. This will clearly be a problem for it going forward.

Why I’m buying

With that said, I retain a bullish outlook. After the recent fall in the Meta share price, the firm’s price-to-earnings (P/E) ratio is now around 16. By comparison, Apple has a P/E of 28, while Alphabet’s is 24. For a big tech stock that’s a low valuation, and a tempting factor for me when considering whether to buy the shares.

Further, while Facebook saw a decrease in the number of its daily active users, across its entire ‘Family of Apps’ (also including Instagram, and WhatsApp) Meta actually saw a small increase, meaning Facebook’s decline could be offset across the business.

I also like the fact the firm is investing in the metaverse. This is an area I have a bullish outlook on. While its expansion into this area has been costly, Bloomberg predicts this space could be worth $800bn in 2024. Granted, it will face competition from game systems and virtual worlds such as Roblox and Decentraland, but I think the firm’s early investment in the space could pay dividends.

So, while the latest earnings report may not have met expectations, I see a solid opportunity in this share price fall. Overall user numbers remain healthy and I like the — albeit costly — moves the firm is making to plan for the future. Should Meta be able to capitalise effectively on the metaverse, I think we will see this play out positively in times ahead. At the current share price, I would look to add it to my portfolio.

The post The Meta share price is down over 30% in a month! Should I buy? appeared first on The Twelfth Magpie.

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Charlie Keough has no position in any of the shares mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK has recommended Alphabet (A shares) and Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.