If you invested $1 in Alphabet in 2004, you would have this amount today.

Internet giant days alphabet (google -1.82%) (GOOG -1.65%) Although it went public in 2004, it never had the monopoly on internet searches that it has today. Sure, it still had a market share of between 35% and 44%, but few people knew it would become the behemoth it is today. More than 90% of searches now take place on Google, the most visited website in the world.

Each dollar invested in Alphabet’s IPO is now worth $55. A 55x return over 20 years dwarfs similar performance in the broader stock market.

Some features, like Google Search, will remain, but Alphabet is a different company than it was back then. And in the future, it’s likely to be a different type of investment.

If you had purchased Alphabet early on, you could have easily set your investment portfolio up for success. Does Alphabet still have the power to carry the portfolio? Here’s what you need to know.

Highest ever spending of $1.65 billion?

Search engines alone couldn’t have made Alphabet such a good investment. That success stemmed from arguably the most spectacular acquisition in corporate history. Alphabet invested $1.65 billion in stock to acquire video platform YouTube in late 2006. The company was less than two years old at the time, but Alphabet saw something special and it was right.

Today YouTube is the second most visited website in the world. The company generated nearly $8 billion in YouTube advertising revenue in its most recently reported quarter. Based on this sum, Alphabet will effectively recoup its initial investment in YouTube. Every 3 weeks.

GOOGL Revenue (TTM) data from YCharts

The combination of Google and YouTube has turned Alphabet into a cash printer, selling advertising to companies looking to reach the largest Internet audience. Alphabet, which amassed nearly $78 billion in free cash flow over the past year, has pockets to invest in new opportunities, defend against (or acquire) potential threats, or cannibalize its shares (via buybacks) to boost profits. It is a technology giant rich in . growth.

A different investment today

Every company goes through phases where growth either speeds up or slows down, but generally the bigger the numbers, the more difficult it is to grow. We can see this currently in effect at Alphabet, which has nearly $300 billion in annual revenue (see chart below). Alphabet is not the hyper-growth stock it was a few years ago. So your return on investment will not be the same as it was in the past.

But that doesn’t mean Alphabet still can’t secure a long-term portfolio.

GOOGL Revenue (YoY Growth) data from YCharts

The company is still investing its profits into growth. To compete with ChatGPT, it built a cloud platform and released software for mobile devices (Android), office software (Google Workspace), and generative AI (Gemini).

But I make so much money that I have so much left over. Alphabet currently has a whopping $120 billion in cash on its balance sheet compared to just $12 billion in debt. The stock does not pay dividends, but management has begun repurchasing shares instead. The number of shares outstanding has declined 10% over the past five years, and shareholders should expect this trend to continue. Alphabet spent $60 billion on share buybacks over the past year.

Is Alphabet stock a buy?

Alphabet is a well-selling stock on Wall Street and a member of the ‘Magnificent 7’, a small number of mega-cap technology stocks that surged in 2023. The stock has surged 55% in the past 12 months.

Thanks to Alphabet’s aggressive share buybacks, the company’s growth prospects look promising. Analysts believe the company can generate returns of more than 17% per annum over the long term.

Currently trading at nearly 27 times earnings, the stock isn’t as cheap as it was before 2023. However, if Alphabet achieves growth that meets analysts’ expectations, it could justify a higher valuation. The current PEG ratio of 1.5 is reasonable for one of the most powerful companies in the world.

GOOGL EPS LT Growth Estimates Data: YCharts

That doesn’t mean the stock won’t have a lot of volatility along the way. If you want to buy Alphabet, consider a dollar-cost averaging strategy. Buy stocks a little at a time to take advantage of market ups and downs, but leave some dry powder in case the stock falls to a more attractive value in the future.