With a year-to-date gain of just over 12%, Alphabet stock (NASDAQ:GOOGL) has emerged as one of the underperformers among the “Magnificent 7.” This lagging performance has sparked discussions about whether it’s time to take a chance on Alphabet shares as we approach Q4. The company’s outlook has been marred by a court ruling suggesting it holds a monopoly in the online search market, leading to fears of potential breakups that could impact its future.

Alphabet Stock Forecast

Despite the concerns, Alphabet continues to receive a consensus rating of “Strong Buy” from many analysts, with a mean target price of $202.09, indicating a potential upside of about 27.1% from recent closing prices. However, the sentiment among analysts has begun to shift. Currently, 82% of analysts rate Alphabet as a “Strong Buy” or “Moderate Buy,” down from 86% three months ago.

Recent downgrades from firms like Rosenblatt, Bernstein, and Loop Capital—from “buy” to “neutral”—have contributed to this cautious sentiment. In contrast, Phillip Securities recently upgraded Alphabet to “buy.” Notably, Evercore ISI lowered its target price from $225 to $200 while maintaining an “overweight” rating, reflecting the mixed perspectives in the market.

Key Risks That Alphabet Faces

While considering the potential of Alphabet stock, it’s essential to acknowledge the significant risks the company is grappling with. The regulatory landscape poses a substantial challenge, with Bernstein estimating that Google could face up to $100 billion in litigations from advertisers claiming overcharges. This ongoing scrutiny has likely made the company more conservative in its strategic approach.

Bernstein analyst Mark Shmulik aptly notes, “If you’re going to be hampered, where maybe you’re fighting with one hand tied behind your back, it becomes a very difficult prospect.” Furthermore, there is a real concern that regulators may push for a breakup of Alphabet to mitigate its apparent monopoly.

The competition in the advertising sector is also intensifying. Rivals like Amazon (NASDAQ:AMZN) and streaming giants such as Disney (NYSE:DIS), Netflix (NASDAQ:NFLX), and Uber (NYSE:UBER) are increasingly vying for advertising dollars, which could pressure Alphabet’s core business.

Lastly, the rapid evolution of artificial intelligence (AI) poses a double-edged sword for Google. While it currently leads the market, the fast-paced advancements in AI mean that the landscape can change quickly, putting pressure on Google to innovate continuously.

Is It Time to Get Greedy and Buy Alphabet Stock?

Despite the pressing risks, it’s crucial to view them in context. Alphabet stock is currently trading at a forward price-to-earnings (P/E) multiple of 20.4, which is lower than its peers in the Magnificent 7 and the average S&P 500 Index member. Given that broader market valuations are often above historical averages, Alphabet stands out as a stock trading at a discount.

Moreover, there are valuable, underappreciated assets within Alphabet’s portfolio. YouTube, for instance, remains the leading streaming platform in the U.S., with significant opportunities for monetization through paid subscriptions. Additionally, Alphabet’s Waymo self-driving unit has begun collaborations with Uber to provide autonomous ride-hailing services in key cities like Atlanta and Austin.

Another promising segment is Alphabet’s cloud business, which reported $10 billion in revenue and achieved its first $1 billion operating profit in Q2. This growth potential further underscores the value that Alphabet may deliver in the medium to long term.

In summary, while the regulatory challenges facing Alphabet stock are significant, they appear to be factored into its current price. Investors willing to get greedy and buy into this underperforming tech stock could find themselves well-positioned for future gains, despite the short-term noise surrounding regulatory issues.

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