The “Magnificent Seven” represents a group of large, tech-focused companies that have surged in the market due to their scale, strong fundamentals, and robust growth. In the ongoing market rally of 2023, these companies, including Alphabet, significantly drove gains in the S&P 500 in 2024.
Interestingly, despite initially lagging behind, one of the Magnificent Seven stocks has witnessed a remarkable upturn in the past month, overshadowing its previous underperformance.
A Rollercoaster Journey
The trajectory of Alphabet stock in 2024 has been turbulent. From being priced above $150 per share in late January to dipping to the low $130 range in early March due to investor concerns surrounding its AI ventures, particularly Google Gemini AI, the stock has experienced highs and lows.
However, news of potential collaboration between Alphabet and Apple for licensing Gemini AI for iPhones sparked a turnaround. The stock soared by as much as 7.7% on March 18, contributing to its impressive 12%+ gain in the last month.
Partnering with Apple could be a game-changer for Alphabet, diversifying its revenue sources beyond ads and fortifying its position in the market.
Challenges and Prospects
Alphabet faces challenges as rivals pose threats in various segments. While Google Search and YouTube rely on advanced AI algorithms, platforms like TikTok and Meta Platforms’ Instagram Reels are emerging as alternative search engines among younger demographics.
In the cloud infrastructure domain, Google Cloud lags behind Microsoft Azure and Amazon Web Services in market share, while iOS outshines Android in key markets like the U.S, benefiting from tighter hardware-software integration.
Shifting Perspectives
Looking at Alphabet’s scenario from a different angle reveals uncertainties despite its established market presence across diverse sectors. Can Alphabet retain its dominance amidst increasing competition, particularly from emerging platforms?
As consumers access an array of entertainment choices, the competition intensifies. Questions arise on whether YouTube can maintain its market share in the face of new streaming platforms.
Moreover, can Google Cloud expand its market share against formidable competitors?
Value Amidst Challenges
Alphabet boasts a solid business model and ample opportunities for AI monetization. With a modest 26.7 price-to-earnings ratio and a 28.8 price-to-free-cash-flow ratio, positioning it favorably among the Magnificent Seven stocks, Alphabet presents an appealing investment proposition.
Despite recent fluctuations, Alphabet’s stable business trajectory and capacity for innovation warrant recognition. Offering a compelling long-term investment opportunity, Alphabet remains an undervalued asset poised for growth.
Investing in Alphabet
Considering investing in Alphabet entails weighing its potential against market dynamics and competitors. While Alphabet didn’t feature among the Motley Fool’s top 10 stock picks, its proven track record and solid financials present a compelling case for future returns.
Through prudent analysis and strategic investment decisions, Alphabet holds promise for investors seeking stable returns amidst a dynamic market landscape.
*Stock Advisor returns as of April 4, 2024
Bank of America is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Bank of America, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
