What Is Going On With Google Stock?

Introduction

Google's parent company, Alphabet Inc., has seen its stock down about 25% from its highs in July, currently trading below $ 150 with a market cap of $ 1.83 trillion and a forward price-to-earnings (PE) ratio of 18.5 times. Interestingly, despite these setbacks, Alphabet's stock has gained 6% year-to-date. Analysts expect impressive sales growth of 133% this year, followed by 11% and 10% in the next two fiscal years. Earnings per share (EPS) are projected to grow even faster, with an expected 31.4% growth in fiscal year 2024, tapering to about 14% in fiscal years 2025 and 2026.

Currently, the average analyst price target suggests a 38% upside from its current price, with a sum of valuation metrics indicating Google is trading below its five-year average. It trades at 30 times its price to free cash flow, slightly above the previous year's figure of 28.1 times. Google's value in terms of growth remains attractive, with a forward PE ratio of just over 1 when looking at price-to-earnings growth.

One reason for the recent stock decline relates to heightened scrutiny from regulatory bodies. The U.S. Justice Department has recently initiated a second antitrust trial against Google, alleging monopoly control over online advertising. The expectation is that if Google is found guilty, its rivals, including Amazon, could potentially gain a foothold in the market.

Despite these allegations and recent stock performance issues, many remain bullish about Google's long-term prospects. The company has a stronghold on the search engine domain, with Google Search recognized for its effectiveness, ease of use, and consumer preference.

Google recently faced misses in their earnings report, particularly concerning YouTube ads and network revenue. However, Google Cloud continues to grow rapidly and show profitability, which could help offset declines in advertising revenues. The company’s various segments—including YouTube and its subscription services—continue to present strong growth potentials.

Moreover, Google's investment in artificial intelligence (AI) and long-term R&D projects continue to show promise, with products like the AI-driven Gemini and other innovations expected to contribute significantly to future revenues. Alphabet also maintains a robust cash flow situation, with ongoing share buybacks and a modest dividend yield of 0.54%.

In conclusion, while short-term headwinds from regulatory scrutiny and advertising revenue misses could weigh on its stock, Alphabet holds a strong position in its core businesses, alongside significant growth potential in cloud services and AI.

Keywords

Google, Alphabet, stock, forward PE, sales growth, EPS growth, antitrust trial, online advertising, Google Cloud, YouTube, artificial intelligence, cash flow, dividend yield

FAQ

1. Why has Google's stock declined recently?
Google's stock has fallen about 25% since its July highs due to a combination of regulatory scrutiny, misses in revenue expectations, particularly in YouTube ads, and a general dip in tech stocks.

2. What is the current price-to-earnings ratio for Google?
The current forward price-to-earnings (PE) ratio for Google is 18.5 times, which is lower than its historical average.

3. How is Google's growth outlook for the coming years?
Analysts project strong sales growth of 133% for this year, followed by 11% and 10% growth in the next two fiscal years, with EPS also expected to grow significantly.

4. What legal challenges is Google currently facing?
Google is currently involved in a second antitrust trial initiated by the U.S. Justice Department, alleging that the company holds a monopoly over online advertising.

5. What are the driving factors behind Google's future growth?
Key growth drivers include advancements in Google Cloud, ongoing innovations in AI, continued growth in YouTube, and strong demand for its advertising services despite recent revenue misses.