Fear, uncertainty and doubt may have investors hitting the “sell” button on tech names. That’s what’s happened here with Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). In hindsight, taking advantage of the recent selloff could prove to be a shrewd move. That’s not to say every tech name is a buy after the sector’s recent weakness. But that may be the case with GOOG stock.
Down around 10% since the start of 2022, the pullback with this FAANG component has been relatively moderate. At least, compared to smaller, more speculative tech plays. In particular, early stage names that have yet to reach the point of profitability.
In addition, among tech stocks on sale, I wouldn’t say it’s the most “can’t miss” opportunity out there. That’s clear from the “B” rating it earns in my Portfolio Grader. However, there’s merit to including this long-standing winner in your portfolio. It’s unclear whether the wild moves we’ve seen the market make in recent weeks will continue, or if things are on the verge of settling down.
Whether things stay rocky in the short term, if your eye is on the long haul, you may want to seize the opportunity today.
GOOG Stock and Its Uncertainty in the Short Term
Like I discussed in my last article on Alphabet, there’s no need to panic about its recent slide. Yes, besides market volatility, direct developments with the company have given investors pause as well. However, with investors souring on tech, and using negative news as justification to sell, they may be overreacting a bit.
That’s of course not to say that there are no concerns with GOOG stock. As with any stock, there are concerns/risks hanging over it. Although its dominance in the search advertising market gives it a deep economic moat, it also makes it a target. And just with litigation, like in the recent antitrust suit filed against it.
Alphabet, like its big tech peers, is a target for greater regulation as well. Regulatory scrutiny has so far been greater in jurisdictions under the European Union’s authority. But the U.S. federal government is taking steps to rein in some of the industry’s practices. This uncertainty will continue to hang over it given that only time will tell whether regulation hurts, or has zero impact, on the company’s operating performance
Coupled with investors cashing-in due to fears that tech names will continue to drop, expect things to remain murky in the short term.
Alphabet Stock and Its Long-Term Prospects
Near-term performance of GOOG stock more likely than not will remain choppy. Yet if your investment time horizon is multi-year, and not in the here and now? For long-term investors, there may be an opportunity stemming from this short-term uncertainty.
How so? While “tech stock” may be associated with “risky,” “pricey” and other terms that are concerning in a market downturn, that’s not an issue here with Alphabet shares. First off, the company is essentially a tech blue chip. With its high operating margins, and consistent profitability, this isn’t the type of stock you need to use far off projections to get an idea of its present value.
Second, and related to point one, is the fact that shares are reasonably priced, with a price-to-earnings (P/E) ratio of 25.2x. Sure, to some this may seem pricey, given how much earnings growth is expected to slow down this year. Per analyst consensus, after growing earnings-per-share (EPS) by around 85% last year, EPS for 2022 is projected to rise by just 3.7%, from $108.42 to $112.46.
Still, weighing that against its quality (deep economic moat, high margins, etc.), 25.2x is a fair multiple. Also, keep in mind that, according to some analysts, a robust ad market may mean the company generates results in the quarters ahead that are stronger than expected. To top things off, there’s also the prospect of growth reaccelerating down the road. The company has plenty of high-growth opportunities. These include new frontiers like the metaverse and self-driving vehicles.
The Verdict on GOOG Stock
With market conditions currently not on its side, a rebound for Alphabet may not be immediate. Again, among tech stocks currently on sale, I wouldn’t say this is the first one I’d back up the truck on.
That said, this is still a great choice of all investors, no matter your risk appetite. It has the qualities of a blue chip stock, combined with the potential for continued growth, Over the long-term, the stock still appears set to deliver solid returns for investors.
Short-term challenges will eventually pass. Now may be a great time to buy while they keep GOOG stock under pressure.
On the date of publication, Louis Navellier had a long position in GOOG. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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