S&P 500   4,981.80
DOW   38,612.24
QQQ   425.61
Palo Alto Networks, Keysight fall; Garmin, Toll Brothers rise, Wednesday, 2/21/2024
Shocking Bank Secret of the Ultra-Rich (Ad)
Applied Materials stock is Ray Dalio's favorite in this new cycle
Palo Alto Networks aims at cyber security leadership
Shocking Bank Secret of the Ultra-Rich (Ad)
Spotify sounding better to analysts as company tunes into profits
3 Reasons the Capital One-Discover merger is a big deal
66,000% upside on tiny biotech? (Ad)
How major US stock indexes fared Wednesday, 2/21/2024
Bears covered shorts on this ETF, 3 stocks to pop on the shift
S&P 500   4,981.80
DOW   38,612.24
QQQ   425.61
Palo Alto Networks, Keysight fall; Garmin, Toll Brothers rise, Wednesday, 2/21/2024
Shocking Bank Secret of the Ultra-Rich (Ad)
Applied Materials stock is Ray Dalio's favorite in this new cycle
Palo Alto Networks aims at cyber security leadership
Shocking Bank Secret of the Ultra-Rich (Ad)
Spotify sounding better to analysts as company tunes into profits
3 Reasons the Capital One-Discover merger is a big deal
66,000% upside on tiny biotech? (Ad)
How major US stock indexes fared Wednesday, 2/21/2024
Bears covered shorts on this ETF, 3 stocks to pop on the shift
S&P 500   4,981.80
DOW   38,612.24
QQQ   425.61
Palo Alto Networks, Keysight fall; Garmin, Toll Brothers rise, Wednesday, 2/21/2024
Shocking Bank Secret of the Ultra-Rich (Ad)
Applied Materials stock is Ray Dalio's favorite in this new cycle
Palo Alto Networks aims at cyber security leadership
Shocking Bank Secret of the Ultra-Rich (Ad)
Spotify sounding better to analysts as company tunes into profits
3 Reasons the Capital One-Discover merger is a big deal
66,000% upside on tiny biotech? (Ad)
How major US stock indexes fared Wednesday, 2/21/2024
Bears covered shorts on this ETF, 3 stocks to pop on the shift
S&P 500   4,981.80
DOW   38,612.24
QQQ   425.61
Palo Alto Networks, Keysight fall; Garmin, Toll Brothers rise, Wednesday, 2/21/2024
Shocking Bank Secret of the Ultra-Rich (Ad)
Applied Materials stock is Ray Dalio's favorite in this new cycle
Palo Alto Networks aims at cyber security leadership
Shocking Bank Secret of the Ultra-Rich (Ad)
Spotify sounding better to analysts as company tunes into profits
3 Reasons the Capital One-Discover merger is a big deal
66,000% upside on tiny biotech? (Ad)
How major US stock indexes fared Wednesday, 2/21/2024
Bears covered shorts on this ETF, 3 stocks to pop on the shift

Analysts suddenly say Google is the place to be in

Key Points

  • Alphabet's empire, which includes the world's most significant search engines, is attracting much-deserved attention from analysts.
  • Current valuations show a discount to its peer group, and analysts are beginning to notice that their current targets may be on the conservative end.
  • Financial performance is only one of the pillars making this stock a wealth multiplier.
  • 5 stocks we like better than Alphabet

Very few times in history have investors come across a stock that offers the sort of moat that Warren Buffett could salivate over, a strong business with solid financials and a structure protecting it from competition that is always threatening to overtake its position in the market. Today, Alphabet NASDAQ: GOOGL is such a stock, though too complicated for Buffett himself.

When Bill Gates pitched Buffett an investment in his company Microsoft NASDAQ: MSFT, he replied that "the internet won't change the way people chew gum." showing his resilience to avoid investments he cannot understand in a single sentence. This could be why he skipped on Alphabet despite it possessing all the metrics he typically looks for.

The two largest search engines in the world are Google and YouTube, both owned by Alphabet and in case you don't get out there too much, people have adopted Google as a verb as "Google it" sounds more befitting than saying "Bing it." Analysts built their price target boosts on this moat and many other factors.

Unshakeable 

Billions of dollars are spent annually to generate business advertising content. Of course, the content needs a platform to connect potential customers to advertised products and services. Today, not as many ads are being shown on radio and television as they once were; here's where they are:

Most advertising content ends up on platforms like Instagram, which is owned and operated by Meta Platforms NASDAQ: META, and everything else pretty much is within websites hosted by Google or videos stuck inside YouTube ads.


Because of this incredible positioning by Alphabet, it would be extremely hard for any new competitor to come in and sweep under them to take away market share. No technology stock compares to how well-positioned Alphabet is, not only as an advertising mecca but also as the world's online library.

Some say that data is the oil of this century; whoever has access to the world's data and sentiment will essentially have a crystal ball, and in this case, that can translate to markets remaining bullish on a stock like Alphabet. Every time you Google something, you are generating data.

A $1.7 trillion market capitalization, which makes Alphabet one of the largest companies in history, is still undervalued. While there is no way to place a value on the billions of datapoints that Google collects every second of every day, it's hard to say how high this stock could go, but here's a more concrete way to put it.

When taken as a five-year average, the business generates an average ROIC (return on invested capital) rate of 17.0%. Because stock prices tend to follow the long-term ROIC rates, this stock could fundamentally become a wealth multiplier for its investors.

It's good and it shows

Because of its immense moat, Alphabet can keep raking in profits year after year. Because it counts on a more than capable management team, these profits are allocated to keep the rates of return where they are today, making everyone financially involved very happy.

Analysts know this, which is why they've been very comfortable raising their price targets for the company, making it one of the darlings within the Invesco QQQ NASDAQ: QQQ, which has, of course,, outperformed the broader S&P 500 by as much as 29.8% during the past twelve months.

While the consensus price target for Alphabet is $147.5 a share, which only gives it a 5.6% upside from today's prices, analysts at places like Roth Mkm and Tigress Financial see the stock valued as high as $166.0 and $176.0, respectively. 

These differing views would send the stock toward new all-time highs, as its ceiling is currently set at $151.5 a share when it touched during the first quarter of 2022. 

Here is the sweetener: the internet software and services industry trades at an average price-to-earnings ratio of 32.1x today, landing Alphabet stock at a discount of 25.3% to the sector with its lower 24.0x P/E.

Being one of the space's biggest and most vital names should command a more premium valuation. If you understand the reasoning behind that logic, you know why Alphabet could be headed to new highs.

Even if new ceilings take longer than expected, you can rest assured that Alphabet's management will keep pumping out double-digit ROIC, which will inevitably act as the magnet to keep pulling the stock price higher, and who knows, maybe even the rest of Wall Street analysts will come to their senses and upgrade the stock in a single wave.

→ This is the #1 Stock to Buy for the AI Tidal Wave (From Chaikin Analytics) (Ad)

Should you invest $1,000 in Alphabet right now?

Before you consider Alphabet, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Alphabet wasn't on the list.

While Alphabet currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

20 Stocks to Sell Now Cover

MarketBeat has just released its list of 20 stocks that Wall Street analysts hate. These companies may appear to have good fundamentals, but top analysts smell something seriously rotten. Are any of these companies lurking around your portfolio? Find out by clicking the link below.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Invesco QQQ (QQQ)N/A$425.61-0.4%0.55%N/AN/AN/A
Microsoft (MSFT)
4.8567 of 5 stars
$402.18-0.2%0.75%36.36Moderate Buy$411.06
Alphabet (GOOGL)
2.5907 of 5 stars
$142.55+1.0%N/A24.58Moderate Buy$153.65
Compare These Stocks  Add These Stocks to My Watchlist 

Gabriel Osorio-Mazilli

About Gabriel Osorio-Mazilli

  • gosoriomazzilli@gmail.com

Contributing Author

Value Stocks, Asian Markets, Macro Economics

Experience

Gabriel Osorio-Mazilli has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Value investing, long/short trading, options, emerging markets

Education

CFA Level I candidate; Goldman Sachs corporate training; independent courses

Past Experience

Analyst at Goldman Sachs, associate at Citigroup, senior financial analyst in real estate


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