There are plenty of Magnificent 7 stocks to consider owning in this current market. Some are more focused on growth, others have better valuations, and some are just proven long-term winners. I think Alphabet (NASDAQ:GOOG) provides the right mix of growth, valuation and long-term historical performance inceptors can get behind.
Valued at $2.2 trillion, Alphabet isn’t cheap by any stretch of the imagination. Currently, GOOG stock trades at a 27.5 price-earnings ratio and offers a 0.45% yield. Thus, this isn’t a stock most would say is cheap in a conventional sense, and it’s not a place dividend investors will immediately flock to for yield.
The thing is, Alphabet’s core business model is among the best in class. And its 15% revenue growth and 57% net income growth over the past year attest to the company’s rock-solid position in its core business segments. Here’s why I think Alphabet should be the Magnificent 7 stock investors focus on right now.
A Magnificent 7 Stock With Huge AI Opportunity
Unlike other more pure-play AI stocks such as Nvidia (NASDAQ:NVDA), Alphabet is often viewed as a much more boring search company. There’s a reason most investor attention is flowing to Nvidia right now — the AI tailwinds behind that company are strong. And there’s no doubt Nvidia will continue to outpace Alphabet in terms of growth in this market.
That said, a recent UBS (NYSE:UBS) report highlights Alphabet Inc. as deeply integrated across all AI value chain layers: enabling, intelligence, and application. Its Tensor Processing Units and Google Cloud Platform position it in the enabling layer, while Gemini enhances its role in intelligence.
Alphabet’s Duet AI assistant and advertising capabilities bolster its position in the application layer, making it well-positioned to capitalize on the projected $1.2 trillion AI market by 2027, according to UBS.
The company’s supporters argue that the market undervalues its expansion in Cloud, Other Bets, Video, and other fast-growing ventures.
With a trading multiple of 20-times Alphabet’s projected 2025 earnings per share of $8.57, the stock appears attractively-priced, especially given Wall Street’s forecast earnings growth of 13.40% for 2025 and an average annual growth of 19% over the past five years.
YouTube is a Great Driver
YouTube has been crucial for Google Services’ growth, with Alphabet enhancing YouTube’s features. A redesign for YouTube Music on the web now includes a dual-column layout and a blurred background, according to 9to5Google.
Additionally, YouTube Music added a feature to remember the last played song, enabling quick playback and maintaining the docked player and Up Next queue for albums and playlists.
Partnerships boosted YouTube Music’s reach, with Alphabet collaborating with Garmin to offer the app on Garmin IQ Connect smartwatches. This positions Alphabet to capitalize on the music streaming market’s projected 14.4% CAGR from 2023 to 2030.
Alphabet has also enhanced YouTube with a redesigned Cast menu, featuring a floating bottom sheet for volume control, voice search, and remote TV options. The YouTube Create video editing app for Android has expanded to 13 more countries, including Australia and the U.S., simplifying short-form video creation without high-end computers.
This Magnificent 7 Stock Is a Buy
Alphabet primarily earns revenue from Google’s advertising business, including search, display, network ads, and YouTube. Additional revenue sources are Google Cloud, the third-largest cloud infrastructure platform, and Google’s subscriptions, platforms, and devices division.
In 2022, Alphabet’s revenue growth came in at just 10% due to macroeconomic concerns reducing marketing and cloud spending, and tough competition from Meta, ByteDance, Amazon, and Microsoft.
However, its core businesses have recently shown improvement. While both Alphabet and Nvidia are “Magnificent Seven” stocks in different sectors, investors should focus on Alphabet’s macro, competitive, and regulatory outlooks to assess its long-term potential.
In combination with its relative valuation, I think GOOG stock remains among the top Magnificent 7 stocks to buy right now.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
