Is GOOG Stock a Buy, Sell, or Hold
The Magnificent Seven—GOOG, AAPL, AMZN, META, MSFT, NVDA, and TSLA—command nearly half of the Nasdaq’s total weighting. While these tech giants are major draws for investors, our recent analysis reveals that not all are equally compelling. Specifically, GOOG stock stands out with notably attractive valuation metrics compared to its peers.
Recently, GOOG’s stock has declined further, reaching exceptionally appealing levels. As a result, we’ve decided to dedicate this article to a closer examination of Google.
But first, let’s start with the bad news: Google is quite possibly the worst name for a company. However, not everything is in the name, and despite its strong resemblance to Gogol (and depression), the company has become one of the most successful ever.
Google has been so successful that it has been one of the world’s top five market capitalization companies since 2016—eight consecutive years in a row.
Now, let’s take a closer look at the current valuations, thanks to data from finviz.com
GOOG’s forward PE ratio is 18.3, while that of the S&P500 is 23.2 (all S&P500 statistics are taken from the State Street Global Advisors website). While the forward PE ratio is lower than that of the broad market, GOOG’s expectations for earnings growth for the next five years are much higher – 20.5% for GOOG vs. 15.16% for S&P500.
Ownership and Short Interest: A Safe Bet for Institutions
Second, let’s examine holders. Insiders and institutional ownership comprise 85% of all stockowners. GOOG is broadly held and much more popular with institutional investors than the average stock in the S&P500. In comparison, JPM’s insider and institutional ownership rate is 70%.
Finally, we will look at short float. Only 0.79% of shares are shorted—GOOG is no GME; nobody thinks Google is expensive or betting on a big downside. On average, most big companies in the S&P500 have a short float of around 1% of their outstanding shares.
Why Is GOOG Stock So Cheap? Regulatory Challenges Loom
This is a long story. As you can imagine, Google is facing many challenges as one of the largest companies in the world. However, the most pressing current is regulatory problems with the Department of Justice.
We are not stock analysts or lawyers to tell you what is going to happen. However, we follow closely analyst estimates, especially on large companies, as we deem their analysis, as a group, to be quite predictive of the future of those stocks.
According to seekingalpha.com, in the last 90 days, 61 professional stock analysts have issued an update on GOOG. 78% of those are either Strong Buy or Buy, while only 22% are Hold. We will repeat that – in the last 90 days, 61 presumingly very intelligent human beings who have dedicated their professional life to stock analysis have decided that GOOG is most likely a buy.
If you are an analyst, GOOG stock will probably be one of the most visible and recognizable updates you will ever release. So, we assume those 61 analysts took the job of analyzing GOOG very seriously. Yet, none of those 61 updates on GOOG was a Strong Sell or even a Sell.
GOOG Stock Compared to Recent History
Seekingalpha.com shows that stock analysts are more cautious now than in the past three years. This suggests they are accounting for potential downsides. However, their estimates indicate that the risk is limited and unlikely to severely impact shareholder value.
Finally, let’s review the projected price targets:
With GOOG’s stock near 160 USD per share, no stock analyst thinks the stock is worth less than 167.80. Moreover, the average price target is 202.93 a share, or 27.64% upside from current prices. That is actually quite high of an upside. META, AAPL, and MSFT all have average price targets between 7% and 15% above current prices.
In the long run, there is no difference between investing and farming. Like a farmer, an investor must choose where to invest his capital, how much to invest in it, and how long.
The Bottom Line
In our opinion, GOOG stock deserves to be invested in. It is not only one of the most recognized and historically successful companies in the world but also exceptionally cheap. Yes, possible future outcomes can be detrimental to your GOOG investment.
However, based on analyst ratings and price targets, we have concluded that most of those detrimental future outcomes are already priced in the stock. This suggests that GOOG’s future could be far brighter than what the market currently reflects.