Alphabet's trillion-dollar mark won't be the end of the near-term gains in stock, according to history

Key Points
  • Over the past month, shares of Alphabet shot up 10%, becoming the latest big tech company to reach a trillion-dollar stock market valuation.
  • Recent trading history in shares of Google's parent company suggest that near-term gains will not stop.
  • Alphabet will report earnings in early February — after its two most recent earnings reports were far from perfect — but bullish analysts see cloud services growth as a driver, as well as a more healthy advertising market.
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Gains propel Alphabet to the one-trillion dollar mark

Alphabet topped the $1 trillion mark in market capitalization last week, becoming the fourth technology company — behind Apple, Microsoft and Amazon — to hit this milestone. Alphabet shares have jumped over 10% in the past month alone, and according to recent trading history, there are more gains to come for Google's parent company over the next month.

According to hedge fund analytics tool Kensho, Alphabet has had similar one-month moves on seven other occasions in the past five years. A month later the trend tends to continue, with the stock gaining another 2%, significantly outperforming the S&P 500 Index.

Reasons for bullishness on Alphabet include its CEO Sundar Pichai, who in December was elevated from running Google to overseeing the parent company after Alphabet founder Larry Page announced plans to step down, along with co-founder and president Sergey Brin.

Another reason Wall Street remains bullish is because the company's cloud business, still far behind the leader Amazon and second-place Microsoft, doubled its revenue run rate from $1 billion to $2 billion per quarter between February 2018 and July 2019. Though CNBC recently reported on the loss of a big health-care cloud contract, which is in a key market sector of focus for Google's cloud growth.

Ads are still the lion's share of Alphabet revenue, but the company is generating more than $8 billion in annualized revenue from the cloud.

Bank of America raised its price target on Alphabet's stock earlier this month, citing a healthy advertising business.

One wildcard in the next month is Alphabet's next earnings report, which will hit the market on Monday, Feb. 3. Alphabet came up slightly short of earnings-per-share expectations in its last earnings report in late October, and the stock dipped, though it quickly rebounded with an upward trajectory over the remainder of 2019.

Last spring Alphabet closed its worst post-earnings day since April 2010 after reporting sluggish advertising numbers. The stock dropped 7.5%, shaving more than $67 billion from its market cap.

Investors also have been ignoring government scrutiny and an election year, which could bring in a new administration more hostile to Google's search business. Probes of big tech are ongoing by the Department of Justice, Federal Trade Commission and state law enforcement, while presidential candidates Elizabeth Warren and Bernie Sanders have said that the companies should be split apart.

Apple and Microsoft are still valued at more than $1 trillion, while Amazon is currently below the trillion-dollar mark. The five most valuable U.S. tech companies now account for more than 17% of the S&P 500, up from 11% in 2015. Some Wall Street analysts are expecting the momentum to slow this year for big tech given the recent gains.