- Alphabet (GOOG, GOOGL) stock is testing new 52-week lows, presenting a great buy the dip opportunity for investors.
- An upcoming 20-for-1 stock split should make the stock even more affordable for retail investors.
- The stock also looks undervalued at current levels even as its business continues to be powered by strong growth in its cloud segment.
Testing new 52-week lows ahead of an upcoming 20-for-1 stock split, shares of Google parent company Alphabet (NASDAQ:GOOG, GOOGL) are a screaming buy.
GOOG stock hit a fresh 52-week low of $2,127.46 on May 20. That new low comes before the company is scheduled to split its stock on July 15 for the first time in eight years. The split, if it were to happen at current levels, would take Alphabet’s share price down to just above $105, making it much more affordable and attractive to retail investors.
With its various businesses continuing to fire on all cylinders and its price-to-earnings (P/E) ratio now down to 19, GOOG stock looks not only affordable, but undervalued at current levels. Investors should take full advantage of a buy the dip opportunity with Alphabet stock.
| GOOG, GOOGL | Alphabet Inc. | $2,109.47, 2107.67 |
Cloud Growth
Although Alphabet announced mixed first quarter financial results, one standout area for the internet search giant was its cloud segment. Google Cloud reported Q1 revenues of $5.8 billion, up 44% from a year earlier driven by strong demand for cloud infrastructure and platform services such as Google Workspace. The cloud unit has become a main engine of Alphabet’s overall growth in recent years, helping to offset slowdowns in other areas of its business, such as online advertising.
Cloud has become so important to Alphabet that the company is doubling down on the business unit, adding thousands of new employees to focus on its expansion. Of the 7,400 people hired at Alphabet during this year’s first quarter, the majority of new positions were in technical and sales roles for Google Cloud. The Mountain View, California-based company is also in the process of adding new services to its cloud offering, notably in cybersecurity.
Valuation
Alphabet remains a dominant technology company with its fingers in everything from artificial intelligence and self-driving cars to smartphones and wearable technology. And the good news for investors is that the company’s valuation has been improving dramatically in recent months as its share price has come down with the broader market.
Alphabet stock is currently trading at about five times trailing-12-month sales, which is its lowest multiple in more than a year. As mentioned, its P/E ratio is now under 20 and the share price is at its lowest level in a year, and declining. Plus, Alphabet reported having $134 billion of cash on hand at the end of the first quarter and its board of directors has approved $70 billion in stock buybacks this year.
While the 20-for-1 stock split in July won’t change the fundamentals of Alphabet as a company, it will make the shares more accessible to a wider number of investors. Currently, people with $2,000 to invest wouldn’t be able to buy a single GOOG share. After the split on July 15, they’ll be able to buy nearly 20 shares.
Take Advantage Of GOOG Stock Low Valuation
While the market selloff this year has been gut wrenching, it has created opportunities for investors to buy quality stocks on the cheap. And Alphabet is one of the best examples of the bargains to be found amid the current stock market carnage.
It is rare for Alphabet shares to trade at such low prices and valuation. Investors who take a position at current levels are sure to be rewarded over the long-term as the share price inevitably rises. Whether you buy in now or wait for the 20-for-1 split in July, take advantage of the current opportunity. GOOG stock is a definite buy.
On the date of publication, Joel Baglole held a long position in GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
