The stock of Google parent company Alphabet (GOOGL) has shed $120 billion from its market capitalization over the past week as investors fret about its continued dominance in online search.
In the past five trading sessions, GOOGL stock has fallen 7%, bringing its year-to-date decline to 20% and putting it in a bear market. The company’s shares have been among the worst performers of the mega-cap technology names, and many analysts say that Alphabet’s stock looks cheap at current levels.
GOOGL stock is currently trading at 15 times its projected profits over the next 12 months. That’s below the average of 21 times that the stock has traded at over the past decade, according to market data. For context, Microsoft’s (MSFT) stock is now trading at 30 times its projected profits over the coming year.
Growing Concerns
Despite the plunge in GOOGL stock, and the fact that the shares appear undervalued, investors have been hesitant to buy-the-dip in the leading technology company. Concerns are growing that artificial intelligence (AI) poses a serious threat to the company’s dominance in online search and the advertising business that is attached to it.
News that Apple (AAPL) is exploring adding AI services of its own to its Safari web browser sent GOOGL stock plummeting this past week. Alphabet currently pays $20 billion a year to be the default search engine on Apple devices such as the iPhone.
According to Statista data from March of this year, Alphabet has about 89.7% of worldwide market share for search engines. That’s down from a 92.9% share in January 2023, but still dominant. However, there are also concerns about Alphabet’s advances in AI and if the company is keeping up with its rivals, and worries about the ongoing antitrust case brought against it by the U.S. government.
Is GOOGL Stock a Buy?
The stock of Alphabet has a consensus Strong Buy rating among 37 Wall Street analysts. That rating is based on 28 Buy and nine Hold recommendations issued in the last three months. The average GOOGL price target of $197.69 implies 29.64% upside from current levels.
