What Does Google’s Latest Court Challenge Mean for Its Soaring 56% Stock Gain?

Thinking about what to do with Alphabet stock right now? You are not alone. With the share price landing at $252.53 and recent moves that have left both optimists and skeptics raising their eyebrows, it is no wonder everyone wants to know whether this tech giant is still a smart bet. Over just the last week, Alphabet returned a modest 0.5%, but the real fireworks have been in the longer-term numbers: a 22.5% leap over the past month, 33.3% so far this year, and a stunning 56.3% jump over the last twelve months. If you are measuring out to five years, you are looking at a total return of nearly 247%.

Some of these gains can be traced back to major headlines, like when China dropped its antitrust investigation into Google or those headline-grabbing talks with Reddit about AI content-sharing. But investors are weighing risks as well, including renewed scrutiny of Google's dominance in online advertising and calls for tech companies to rethink visa policies due to pending H-1B fee changes. So, has the stock's rapid climb moved it into overvalued territory, or is there still unrecognized value left?

Interestingly, when scored against a group of key valuation checks, Alphabet is considered undervalued in just 1 out of 6 measures, a relatively low tally that might surprise some investors. Still, sheer momentum and a pipeline of big technological and policy developments are keeping this stock firmly in the spotlight.

Let us dig into what those valuation checks actually mean. Later on, I will share an even better lens for spotting when Alphabet might be truly undervalued or overpriced, so you will want to stick around.

Alphabet scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Alphabet Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future cash flows and discounting them back to today’s dollars, capturing what those future earnings are worth right now. For Alphabet, the latest reported free cash flow stands at $81.4 billion, an impressive figure that sets the stage for long-term forecasting.

Analyst forecasts anticipate Alphabet’s free cash flow rising to $140.1 billion by 2029, with Simply Wall St extrapolating further growth out to 2035. While concrete analyst estimates only cover the next five years, these extended projections suggest continued expansion. As always, long-range forecasts become more uncertain.

After running these numbers through the 2 Stage Free Cash Flow to Equity model, the estimated fair value per share comes out to $242.45. With Alphabet’s share price now at $252.53, this implies the stock is trading roughly 4.2% above its calculated intrinsic value for a modest overvaluation.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Alphabet.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Alphabet's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Alphabet Price vs Earnings

For profitable companies like Alphabet, the price-to-earnings (PE) ratio is a time-tested way to measure how much investors are willing to pay today for a dollar of earnings. It helps assess whether the stock is priced attractively relative to its profits. Growth expectations and overall market risk both influence what the “right” PE should be. Faster-growing, lower-risk companies tend to command higher multiples, while more mature or volatile firms trade at lower PEs.

Alphabet currently trades on a PE of 26.43x. By comparison, peers in the sector average around 16.97x, with the broader industry also at a much lower 17.81x. At first glance, this suggests Alphabet is pricier than its direct competitors and the industry benchmark. However, these simple comparisons do not capture the full picture. That is where the “Fair Ratio” comes in, which is Simply Wall St’s proprietary benchmark that factors in Alphabet’s earnings growth, profit margins, size, business model, and unique risks.

The Fair Ratio for Alphabet, calculated by modeling these company-specific attributes, sits at 39.36x. This approach is far more comprehensive than just looking at peers or industry averages because it tailors the expectation to Alphabet’s growth profile and risk level. Currently, Alphabet's actual PE is significantly below its Fair Ratio, signaling the company may be trading for less than what its fundamentals justify.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Alphabet Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a simple, approachable tool that lets you tell your story about a company by taking your beliefs about its future (like revenue, profit margins, and growth) and turning them into a fair value grounded in concrete forecasts. Narratives bridge the gap between headlines and numbers by connecting your perspective on Alphabet’s business to a financial forecast, and then comparing that to the current share price.

On Simply Wall St’s Community page (used by millions of investors), anyone can access and create a Narrative in minutes. Narratives help you decide when to buy or sell by updating your fair value as new information, earnings, or news emerges, making your investment view dynamic rather than static. For example, the most optimistic Alphabet Narratives see a fair value as high as $268 per share, expecting years of double-digit revenue growth, while the most cautious expect as low as $166, reflecting slower growth and heightened risks. Whichever story you believe, Narratives make it easier to act on your insights and see how they compare to the wider market.

Do you think there's more to the story for Alphabet? Create your own Narrative to let the Community know!

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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