We came across a bullish thesis on Alphabet Inc. (GOOGL) on Substack by Bulls On Parade. In this article, we will summarize the bulls’ thesis on GOOGL. Alphabet Inc. (GOOGL)’s share was trading at $165.87 as of March 10th. GOOGL’s trailing and forward P/E were 20.63 and 18.73 respectively according to Yahoo Finance.
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The recent market correction, driven by macroeconomic fears such as trade wars, inflation, and recession concerns, has created a compelling buying opportunity. The tech sector, particularly the Magnificent 7, has been hit hard, making Alphabet (GOOGL) an attractive stock to accumulate during this pullback. Alphabet’s unparalleled suite of assets—including Google Search, YouTube, Google Cloud, Waymo, and its AI developments—positions it as the most compelling Magnificent 7 stock to own. Notably, YouTube alone generates nearly as much revenue as Netflix, highlighting Alphabet’s dominance in digital media. While investors are wary of its $75 billion capex budget, this investment is essential to advancing AI and computational capabilities, particularly as the company shifts toward more complex reasoning models beyond traditional large language models.
Trading at approximately 19x P/E, Alphabet’s valuation remains remarkably reasonable for a tech giant of its scale and innovation. The breadth of its offerings, profitability, and competitive position make it an unmatched digital conglomerate. Looking ahead, two key growth drivers—Waymo and Willow—could significantly enhance Alphabet’s valuation. Waymo, Alphabet’s autonomous driving subsidiary, is poised to disrupt the ridesharing industry and challenge Tesla’s dominance in robotaxi technology. With an 80% ownership stake, Alphabet stands to benefit from Waymo’s expansion and its projected valuation of $350 billion to $850 billion by 2030. Waymo’s autonomous vehicles already demonstrate an 88% reduction in property damage claims and a 92% reduction in bodily injury claims compared to human drivers, reinforcing its leadership in the space. The potential for Alphabet to spin off Waymo within the next few years could unlock substantial shareholder value.
Beyond autonomous driving, Alphabet’s breakthrough in quantum computing with its Willow chip could redefine computing power. Willow’s ability to reduce computational errors exponentially and perform complex calculations in minutes that would take traditional supercomputers septillions of years represents a seismic leap in quantum technology. While the commercial impact of Willow may take time to materialize, its implications for scientific discovery and AI advancement are profound. If fully realized, Willow could position Alphabet as a dominant force in next-generation computing, challenging even NVIDIA in high-performance chips.
Despite these groundbreaking innovations, Alphabet remains one of the most undervalued Big Tech stocks, primarily due to regulatory concerns surrounding Google Search. However, the company’s financial strength—holding $95 billion in cash equivalents and $163 billion in current assets against $125 billion in total liabilities—ensures its resilience. Its enterprise value of $2.0 trillion is well justified given its diversified revenue streams, high margins, and future growth potential. Compared to its peers, Alphabet trades at a significant discount, with an EV/EBITDA multiple of 11.6x, far below the peer median of 20x. This valuation disconnect presents a rare buying opportunity for long-term investors.
While regulatory risks remain the primary headwind, Alphabet’s strong balance sheet, diversified growth engines, and compelling valuation make it an exceptional investment. The market’s underappreciation of Waymo and Willow, combined with Alphabet’s entrenched dominance in digital services, suggests substantial upside potential. As these catalysts materialize, Alphabet could emerge not only as the leader in AI and cloud computing but also as the most valuable company in the world.
Alphabet Inc. (GOOGL) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 234 hedge fund portfolios held GOOGL at the end of the third quarter which was 202 in the previous quarter. While we acknowledge the risk and potential of GOOGL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GOOGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.