Is Alphabet Misunderstood? Here’s Why the Bulls Are Buying
Shares of Alphabet (NASDAQ: GOOGL), the parent company of Google, have had a rough ride so far in 2025.
Like several other members of the Magnificent Seven, the tech giant is under pressure. The stock is down 27% from its 52-week high and is 20% in the red year-to-date, firmly in bear market territory.
The negative headlines haven’t helped. Last week, Alphabet was dealt another blow when a federal judge ruled that Google had operated an illegal monopoly in the online advertising market. It marked the second time in eight months that Google was labeled an unlawful monopolist under the Sherman Antitrust Act. The decision opens the door for the Department of Justice to force Google to sell parts of its ad-tech business, potentially. While Alphabet has already stated its intention to appeal the ruling, the legal overhang is adding to investor anxiety.
But underneath the noise and short-term volatility, there’s a strong bull case to be made. With a compressed valuation, strong fundamentals, and ongoing growth in critical business areas, Alphabet may be one of the most undervalued opportunities in the tech space today. Here's why.
A Historically Low Valuation
Alphabet’s valuation is striking. The company has historically traded at a P/E ratio of approximately 28, but it has recently decreased to 18. Even more telling is the stock’s forward P/E ratio of 15. This compression reflects broader market fear and repricing across the tech sector, but it could be an overreaction. If Alphabet continues to deliver earnings growth, current levels could represent a compelling long-term entry point.
Tariff Resilience Sets Alphabet Apart
Unlike tech peers Apple, Tesla, or NVIDIA, Alphabet’s core revenue driver, digital advertising, isn’t directly tied to imported goods or exposed to global supply chain risks.
Its business is more insulated from tariffs and less reliant on China, a key differentiator in today’s volatile geopolitical climate.
With more than half of its revenue generated outside the United States, Alphabet has a global reach that is not overly dependent on politically sensitive markets.
Search Dominance and Emerging AI Leadership
While OpenAI's ChatGPT has disrupted how users interact with information and sparked fears that generative AI could erode Google’s search dominance, Alphabet has quickly responded. The Gemini model and AI Overviews now integrate generative AI directly into Google Search. The company’s immense data advantage, through platforms such as Android, Chrome, YouTube, and Search, gives it a critical edge in training and scaling AI models more efficiently than most of its rivals.
Google Cloud is also gaining traction, with enterprise clients increasingly adopting its AI-powered tools. YouTube remains a social and entertainment giant, with revenue momentum driven by subscriptions and an expanding user base. Meanwhile, Waymo, Alphabet’s autonomous driving unit, has expanded testing across more than 10 cities and remains one of the early leaders in self-driving technology.
Strong Earnings and a Fortress Balance Sheet
Alphabet’s financials remain robust. In 2024, the company delivered 14% revenue growth and $8.04 in EPS.
For Q4, it reported revenue of $96.47 billion, just shy of expectations, and earnings of $2.15 per share, slightly beating estimates.
YouTube ad revenue was a standout, reaching $10.47 billion.
Even in a challenging environment, Alphabet continues to post strong free cash flow and profitability. With $96 billion in cash on hand, Alphabet is well-positioned to weather macro challenges and invest for the future.
Looking ahead, analysts expect EPS of $2.01 for the March 2025 quarter, up from $1.89 a year ago, a clear sign of resilience.
The Bottom Line
Alphabet’s legal troubles and stock decline paint a bleak short-term picture, but the company’s long-term fundamentals remain intact. Trading at a historically low valuation, with a dominant market position and solid financials, Alphabet looks more like a misunderstood opportunity than a company in decline. For investors with patience, the current dip could offer a rare chance to own one of tech’s biggest names at a potentially meaningful discount.
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