Alphabet’s (NASDAQ:GOOG,GOOGL) flagship Google search engine just turned 25 this week. However, among GOOG stock investors, there isn’t much celebration going on about reaching this milestone.
Rather, worries about issues more pertinent to the future performance of this tech giant’s shares are top of mind right now, and for good reason.
The company’s antitrust trial kicked off earlier this month.
The filing of an antitrust suit against another top big tech name, Amazon (NASDAQ:AMZN), has also heightened concerns about antitrust scrutiny of Alphabet.
Also, investors are digesting the prospect of interest rates staying “higher for longer,” and what that means for tech stock valuations. Yet even as all of this plays out, is it time to avoid GOOG?
Not so fast! Instead, as these issues affect the stock’s performance in the short-term, there may be the opportunity to scoop up a long-term position.
GOOG Stock and Its Stalled Comeback
Until a few weeks ago, Alphabet was amid a stock price comeback. Throughout the summer, strong quarterly results and AI tailwinds sent shares back into rally mode and kept them there.
During this time frame, GOOG stock perked up from around $125 per share, back up to near $140 per share. As Louis Navellier and the InvestorPlace Research Staff pointed out earlier this month, GOOG’s rally carried on, even as “AI mania” waned for other tech stocks.
However, in recent trading days, investors have pivoted back to a more cautious view about Alphabet stock, for the reasons mentioned above.
Shares were first knocked lower, in tandem with other tech stocks and the broad market, by the “higher for longer” interest rate news. Confidence in a swift “Fed pivot” has cratered.
With this putting investors in a more bearish mood, considering the Amazon antitrust case, Alphabet’s own antitrust headwinds are starting to weigh on shares.
Still, these new challenges notwithstanding, you do not necessarily need to stay away. It’s very possible that this company (and the stock) can overcome them.
Assuaging Antitrust and Interest Rate Worries
It’s not set in stone that high interest rates will keep GOOG stock stuck at current levels. Or worse, knock shares back down to lower prices.
For one, as Wedbush’s Dan Ives recently argued, tech stocks can still power ahead despite high rates. To back up his case, the analyst cited AI growth, as well as the rebound in enterprise IT spending.
Such a scenario could play out for Alphabet, especially since, in addition to these favorable factors, the company also has the digital ad rebound, plus the positive impact of cost reduction efforts on its side.
All of this could enable the company to produce the type of double-digit earnings growth to not only sustain GOOG’s current valuation, but justify an additional move higher as well.
The antitrust scrutiny may not be reason for concern, either. At least, that’s the view of JPMorgan Doug Anmuth. On Sep. 8, around the time the antitrust trial began, the analyst argued this courtroom battle is a “win-win” for Alphabet.
Per Anmuth, even if Alphabet loses the case, it can still gain. Why? Losing the case would mark the end of the company’s current search distribution practices, resulting in significant cost savings.
Alphabet is a Buy
Turbulence with GOOG stock could continue in the near-term. Antitrust and interest rate anxiety may carry on from now until year’s end, or well into 2024.
However, no matter if the stock experiences major or minor weakness, if you are a long-term investor, consider it an opportunity to buy. Even if shares experience little turbulence from here, or resume climbing sooner-than-expected, you may still want to buy.
Alphabet sports a strong combination of a reasonable valuation (23.3 times forward earnings), coupled with the prospect of healthy earnings growth.
Compare that to other “Magnificent Seven” components, which may be pricey relative to growth projections, such as with Microsoft (NASDAQ:MSFT), or richly-priced and possibly at risk of being “priced for perfection,” like Nvidia (NASDAQ:NVDA).
Hitting the sweet spot as a reasonably priced name with solid growth potential, GOOG stock is a top buy among the “magnificent seven.”
— Thomas Niel
Apple to SHOCK Emerging $46T Industry [sponsor]Silicon Valley venture capitalist Luke Lango says this little-known Apple project could be 10X bigger than the iPhone, MacBook, and iPad COMBINED! Investing in Apple today would be a smart move... but he’s discovered a bigger opportunity lying under Wall Street’s radar -one that could give early investors a shot at 40X gains! Click here for more details.
Source: Investor Place