1. Alphabet Inc. (NASDAQ:GOOGL)
Forward P/E, as of September 22: 21.4
Analyst Upside Potential, as of September 22: 25%
Number of Hedge Fund Holders: 216
Alphabet Inc. (NASDAQ:GOOGL) is one of the most undervalued blue chip stocks to buy according to analysts. The company owns a range of products, including Google Search, Google Maps, YouTube, Google Cloud, and Waymo.
The company is relentlessly working to improve the Gemini experience and is also actively involved in developing AI hardware, having launched its NVIDIA chip rival in May. Moreover, the latest version of Gemini has accelerated performance across text, audio, video, and code.
While Google’s tensor processing units (TPU) only account for almost 20% of the market, its advancements promise higher market shares. In addition to that, its six-generation chips are 67% more energy efficient compared to the previous generation of processors.
Alphabet Inc. (NASDAQ:GOOGL) logged revenue worth $85 billion in the fiscal second quarter of 2024, driven by the growing momentum in cloud and search. Additionally, over 60% of generative AI startups and 90% of generative AI unicorns are customers of the Google Cloud. One can infer that the technology giant is well-positioned to exploit the next wave of artificial intelligence and innovation, making it a solid investment.
Analysts are bullish on GOOGL and their 12-month median price target of $205 points to a 25% upside from current levels. Overall, 216 investors held stakes worth $35.31 billion in Alphabet Inc. (NASDAQ:GOOGL). Of those, Fisher Asset Management was the highest stakeholder with a position of $8.86 billion.
Patient Capital Management mentioned Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter:
“Alphabet Inc. (GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
Overall, GOOGL ranks first among the 13 most undervalued blue chip stocks to buy according to analysts. Our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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