Growth stocks have been on a wild ride lately, with the specter of a U.S. recession fading and a potential Fed rate cut looming. Despite this, many growth stocks still haven’t fully recovered from their 2024 highs. The Nasdaq Composite ($NASX) is trailing behind by almost 6% from its peak, with tech giant Alphabet (GOOG) taking a beating in the markets.
The Decline of GOOG Stock
Alphabet hit record highs in early July but has struggled since then. Its Q2 earnings beat expectations, particularly in cloud revenues, but fell short in YouTube’s growth. The recent launch of SearchGPT by OpenAI has raised doubts about Google’s dominance in the search market, contributing to market jitters. Concerns over the Justice Department potentially breaking up Alphabet further exacerbated the slump.
Digging Deeper into the Sell-Off
Despite the setbacks, some analysts argue that the sell-off in Alphabet stock is overblown. YouTube’s potential for growth remains untapped, with opportunities in the cord-cutting era. In the AI arena, despite early stumbles, Alphabet is making strides after the debacle of Bard’s debut in 2023. Regulatory challenges loom large for Big Tech, but Alphabet isn’t alone in facing these hurdles.
Forecasting the Future of GOOG Stock
Opinions vary on Alphabet’s prospects, with concerns over tough comps, rising expenses, and increased competition in the digital ad market. However, the consensus remains optimistic on GOOG, with an overwhelming majority of analysts rating the stock as a “Strong Buy” or “Moderate Buy.” The mean target price of $203.76 suggests a nearly 24% upside potential.
Should You Invest in Alphabet Stock?
While Alphabet grapples with challenges, its current valuation and progress in AI make it an attractive buy. Despite perceptions of lagging in AI initiatives, Alphabet’s stock price appears to reflect these risks. With a reasonable price-to-earnings multiple of 20.2x and ongoing advancements in AI, Alphabet presents itself as a compelling growth stock at its current price point.
