Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has long been synonymous with growth. However, it is now in unfamiliar territory as it trades at very cheap valuations for a tech stock. It is down almost 17% year-to-date despite earnings and revenue expanding at a solid pace.
GOOG is the Magnificent Seven’s laggard if you take Tesla (NASDAQ:TSLA) out of the equation. Yes, Apple (NASDAQ:AAPL) has shed a little more in year-to-date gains but GOOG stock trails in comparison when you look at post-COVID gains. Many believe Google is en route to losing its search engine dominance due to AI, but I do not think the massive discount should be overlooked.
GOOG stock’s median price-earnings ratio over the past decade is at 28.55 times. The minimum was 17.4 times. Right now, the stock trades at less than 20 times earnings and may go even lower due to market volatility. I think this is a good chance to start accumulating GOOG stock for a long-term position.
The data does not suggest Google is losing its luster by any means. In Q4, Google Search ads generated $54 billion and grew 13% year-over-year, well above analyst expectations. YouTube and Cloud also exited 2024 at a combined $110 billion annual revenue run rate, with Q4 2024 revenue rising 12% year-over-year to $96.5 billion and full-year revenue hitting $350 billion, up 14% year-over-year. Net income rose 28% year-over-year, and EPS rose 31% year-over-year.
Google also has the best AI product right now (Gemini 2.5 Pro) and the Cloud + YouTube growth is more than enough to offset any Search declines, if that even happens.
GOOG stock is a buy below $200 in my book. Again, the broader market could cause it to trend lower this year, but long-term investors should avoid getting shaken out.
