Alphabet (GOOGL): Assessing Valuation After Recent Share Price Surge and Continued Investor Optimism

Alphabet (GOOGL) shares have been gaining momentum recently, catching the attention of investors after strong returns in the past quarter. The company’s continued growth is fueling discussion about its valuation and potential next moves.

See our latest analysis for Alphabet.

Alphabet’s recent share price surge has built on a remarkable run this year, with the stock climbing 5.4% over the past month and year-to-date gains standing at 37.2%. While short-term momentum is clearly in play, the longer-term picture is even more impressive. The total shareholder return over the last twelve months is 57.96%, with substantial multi-year compounding highlighting sustained outperformance.

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Despite these impressive gains, investors are asking a familiar question: does Alphabet’s current valuation reflect its true potential, or is everything already priced in, leaving little room for further upside?

Most Popular Narrative: 9.5% Overvalued

Alphabet’s last closing price of $259.92 sits noticeably above the fair value estimate presented in the most widely followed narrative. This reveals a clear divergence between investor optimism and this fair value calculation. This sets the stage for a closer look at what’s driving this perspective and why Alphabet’s market momentum might not tell the entire story.

"Notably, Alphabet stands out among the Magnificent 7 as the most undervalued on a price-to-earnings (P/E) basis. Despite its consistent revenue and earnings growth, Alphabet trades at a discount compared to peers like Microsoft, Apple, and Amazon. The company’s substantial share buyback program underscores management’s confidence in its long-term prospects. In 2024, Alphabet repurchased approximately $17.6 billion worth of shares, enhancing shareholder value while reducing outstanding shares."

Read the complete narrative.

Want to know how Alphabet’s value case weaves together blockbuster buybacks, eye-catching growth forecasts, and the belief it’s still the ‘cheapest’ tech giant? Some aggressive projections pull this narrative higher than you might expect. Uncover the forces behind this bold price target.

Result: Fair Value of $237.43 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, regulatory scrutiny and rising capital expenditures could challenge Alphabet’s bullish story if growth or profitability expectations stumble in the coming quarters.

Find out about the key risks to this Alphabet narrative.

Another View: Multiples Tell a Different Story

Taking a look through the lens of price-to-earnings, Alphabet trades at 27.2 times earnings. While that appears cheap compared to peers averaging 58.6 times, it is actually higher than the industry average of 15.5. The market is paying up relative to its sector, which may signal either untapped potential or heightened valuation risk. Does this premium point to future growth, or should investors worry about limited upside from here?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Alphabet Narrative

If you’re not convinced by these perspectives, or prefer to dive into the numbers and craft your own angle, you can easily shape your own view in just a few minutes. Do it your way

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Alphabet.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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