Let's talk about the popular Alphabet Inc. (NASDAQ:GOOG.L). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Alphabet’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Alphabet still cheap?
Good news, investors! Alphabet is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $3730.50, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Alphabet’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Alphabet look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Alphabet's earnings over the next few years are expected to increase by 47%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Since GOOG.L is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on GOOG.L for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy GOOG.L. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.
If you'd like to know more about Alphabet as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Alphabet, and understanding this should be part of your investment process.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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