With a Year-to-Date gain of a little over 12%, Alphabet (GOOG) (GOOGL) finds itself among the laggards of the “Magnificent 7” group, trailing behind the S&P 500 Index. The tech giant’s outlook has been shadowed by a recent court ruling pointing towards its monopoly status in the online search market, sparking discussions about potential break-ups and unsettling the markets. Is now the right time to adopt a greedy stance and consider buying Alphabet shares for the upcoming Q4?
Insights into GOOG Stock Forecast
While GOOG maintains a “Strong Buy” consensus rating from most sell-side analysts with a mean target price of $202.09, a slight air of caution looms over the stock as some analysts have shifted their perspectives.
Currently, 82% of analysts covering Alphabet rate it as either a “Strong Buy” or a “Moderate Buy”, a slight drop from the previous 86%. Recently, top analysts like Rosenblatt, Bernstein, and Loop Capital have downgraded GOOG from “buy” to “neutral”, while Phillip Securities raised the stock to a “buy” three months ago. Evercore ISI also reduced Alphabet’s target price from $225 to $200 while maintaining an “overweight” rating.
Evaluating Key Risks Alphabet Faces
Challenges are abundant for Alphabet as regulatory risks loom large, with Bernstein estimating potential litigations of $100 billion for overcharged ads. Moreover, increasing regulatory scrutiny might restrain Google’s aggressive stance in the near future.
In addition to regulatory hurdles, stiff competition from major players like Amazon, Uber, Disney, and Netflix poses a threat to Google’s core advertising business. The emergence of artificial intelligence as a formidable competitor in the search market adds another layer of uncertainty, despite Google’s current dominance.
Mulling Over the Decision to Invest in Alphabet Stock
Despite the risks Alphabet faces, its stock trades at a forward Price-to-Earnings (P/E) multiple of 20.4x, the lowest among the “Magnificent 7” stocks and a discount compared to the S&P 500 Index. While tech valuations remain relatively high, GOOG presents a rare opportunity by trading at a discount to historical valuations.
Moreover, Alphabet boasts undervalued assets such as YouTube, a powerhouse in streaming, with significant room for monetization, including through subscriptions. The Waymo self-driving unit and the Cloud segment also present growth opportunities for Alphabet, with recent milestones showing promising signs of advancement.
While regulatory concerns persist, the current stock price likely reflects these risks, making Alphabet a potentially lucrative investment in the long run, despite short-term price volatility driven by regulatory uncertainties.