Rather under-the-radar, Google (GOOG, GOOGL) is now holding the crown as the top-performing member of the closely watched FAANG (Facebook, Apple, Amazon, Netflix, and Alphabet’s Google) complex amid a summer surge in its stock price.
Shares of Alphabet, Google's owner, tacked on an impressive 8.2% in August, lagging only behind a 12.8% pop in Netflix. But year-to-date, Alphabet holds a wide lead over its FAANG cohorts.
Alphabet's stock has skyrocketed 66% on the year, thumping second place performer Facebook's 40% gain. The worst-performing FAANG stock is Netflix with a 8% increase year-to-date.
Even Microsoft with its strong year financially hasn't kept pace with Alphabet. Microsoft stock is up 36% in 2021.
"We view this part of a risk-on trade and many investors playing a digital advertising tidal wave of demand that is clearly putting tailwinds into the stock. Also, Google is having success with cloud services which is another leg to the growth story as they play catch-up to Microsoft and Amazon," Wedbush tech analyst Dan Ives tells Yahoo Finance.
The latest bull run in Alphabet's stock appears to have been ignited by a second straight impressive quarter, fueled by better cost management, strength for YouTube and increased wins for cloud services. Alphabet's second quarter sales rose 62% from the prior year to $61.9 billion. Operating profit margins expanded to 31% from 17% a year earlier.
"Google continues to grow revenue and EPS at a ~20% CAGR on a normalized basis. The company continues to innovate its product, and its machine learning capabilities should help advertisers get higher ROI, causing them to continue to allocate their advertising budgets to Google," Barclays tech analyst Ross Sandler wrote in a research note earlier this month.
To be sure, the run in the stock price has sent Alphabet's valuation to loftier levels — raising expectations for the company's financial performance.
Alphabet's advance has pushed its valuation — depending on what metric you look at — to record levels compared to the past decade, per Yahoo Finance Plus data.
For instance, Alphabet's current forward price-to-earnings multiple of 31.2 times is well above its 27 times 10-year average. At $1.92 trillion, Alphabet's market cap is at a record high — putting it in third place behind Apple ($2.54 trillion) and Microsoft ($2.3 trillion) in the most valuable company race.