3 Reasons Why Alphabet's Built to Withstand a Difficult Market

Over the last six months, rising inflation and possible interest rate hikes by the Federal Reserve have sent the market into a slump. High inflation often crushes both growth and earnings, driving investors to sell stocks in anticipation of that plunge. But Alphabet (NASDAQ: GOOGL) ranks among a few select stocks built to withstand inflation. Here are three reasons why Alphabet can survive and thrive while the rest of the market retreats.

When inflation rises and the economy surges, businesses tend to generate lots of cash. To keep their growth going, they often plow that cash back into advertising. And if those businesses want the biggest bang for their advertising buck, few companies can supply it as well as Alphabet. Rising demand for ads, coupled with Alphabet's commanding market share and convenient, advertiser-friendly features, gives the company the pricing power it needs to raise prices faster than inflation, preserving its profits in the process.

You can see that pricing power in Alphabet's latest 10-K. Cost-per-click (CPC) -- how much Alphabet charges advertisers every time someone clicks on an ad -- rose 15% over the course of 2021. And people clicked a lot more, too: Google's 2021 paid clicks rose 23% from 2020.

Source Fool.com