This is the Cheapest Mag 7 Stock. But Is It a Buy?

Alphabet (NASDAQ: GOOGL), the parent company of Google, is currently the cheapest of the MAG 7 stocks, trading at a forward price-to-earnings (P/E) ratio of around 17. 

For a tech giant of this size and importance, this valuation is historically low and has caught the attention of many investors. 

So, why is Google trading at such a discount, and does that make it a buy?

First off, Google is facing challenges in its core Search business, as AI-enhanced tools from competitors like Microsoft’s Bing are starting to change the landscape. On top of that, there’s an ongoing Department of Justice antitrust case, which could result in Alphabet being broken up. 

Before we go any further, it’s worth noting the irony that the two biggest bear cases for GOOGL directly contradict each other. Investors fear that Google search will be disrupted by new competition … and that it’s currently under investigation for being a monopoly. It’s unlikely that both things can be true. 

Indeed, Google remains dominant in search, holding about 90% of the market, and its long history of search data and ad monetization strength are big advantages that competitors struggle to match. 

Google Cloud is another bright spot, recently showing 29% year-over-year growth, and Waymo is leading the robotaxi space, growing its paid rider base to 100,000 riders per week. 

While some of Alphabet’s lesser-known divisions, like Waymo, aren’t fully reflected in its stock price, the company’s sheer scale and diversification give it an edge in many future-facing industries like AI and autonomous driving.

Even if Alphabet is broken up, many analysts believe it would be worth more as separate entities—especially YouTube, Google Cloud, and Waymo, which could command much higher valuations on their own.

Currently, Google is starting to get cheap enough to make its Zen Score quite attractive, with the company scoring a 53, while its industry peers average a score of 26.

This is due partly to GOOGL’s value relative to its cash flow:

• GOOGL ($148.71) is undervalued by 37.1% relative to our estimate of its Fair Value price of $236.41 based on Discounted Cash Flow (DCF) modeling, but does not have a significant margin of safety
• GOOGL ($148.71) is significantly undervalued by 37.1% relative to our estimate of its Fair Value price of $236.41 based on Discounted Cash Flow (DCF) modeling, which includes a healthy margin of safety

But the balance sheet is also in incredible shape, with over $400B of assets on the books and only $120B of liabilities. 

Click here to view 38 due diligence checks on GOOGL. 

Despite investor fears, top analysts we track haven’t issued a single sell rating for the stock. It’s a consensus strong buy, with even the median forecast predicting a 36% gain from current levels: 

See why analysts forecast 60%+ upside for GOOGL. 

Bottom line? With Alphabet trading at a lower multiple than its peers, long-term investors may see this as a strong buying opportunity. If the company can overcome short-term headwinds, its innovative tech and dominance in many growing sectors could lead to significant upside.

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