Jim Cramer’s Latest Calls: 10 Stocks You Should Not Miss

3. Alphabet Inc (NASDAQ:GOOG)

Number of Hedge Fund Investors: 165

Jim Cramer in a latest program on CNBC said he agrees with the latest bull case thesis on Alphabet (NASDAQ:GOOG) from Michael Nathanson of MoffettNathanson, who said the stock is undervalued. Nathanson also believes fears around Alphabet’s (NASDAQ:GOOG) search business amid threats from ChatGPT and Perplexity are overstated.

During an interview with CNBC, the analyst said:

“We also thought that the fears about competition from ChatGPT or Perplexity were overdone.. So, Alphabet’s doubled their efforts over the past year, rolling out new products. But if you look at what they’re doing now in search with AI overviews, it seems to be working.”

Alphabet (NASDAQ:GOOGL) reported strong quarterly results recently. The results show that the market has been ignoring the company’s key secondary businesses and the stock remains undervalued despite concerns around AI search and regulatory onslaught.

Google’s secondary ventures in AI, autonomous driving, and other areas are making solid progress, especially in the Waymo robotaxi segment. Currently, Google’s stock trades below 20 times forward earnings, offering potential upside as EPS and other financial metrics strengthen in coming years. For next year, the consensus EPS estimate sits around $9. However, Google has consistently beaten projections, delivering $7.54 in trailing twelve-month EPS compared to the expected $6.79—a roughly 11% outperformance.

With the 2025 EPS forecast at around $9, Alphabet (NASDAQ:GOOGL) could realistically achieve earnings closer to $10 if it maintains its historical outperformance rate. At a projected $10 EPS, Google’s forward P/E multiple would be approximately 17, a relatively low valuation for a diversified market leader.

Polen Focus Growth Strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q3 2024 investor letter:

“Alphabet Inc. (NASDAQ:GOOG) and Amazon were also top absolute detractors. Alphabet’s better-than-expected results were overshadowed by an adverse ruling related to the U.S. Department of Justice’s (“DoJ”) anti-trust case against the company. We expected an adverse ruling and are monitoring potential remedies recommended by the DoJ and subsequently ruled on by the judge. This will likely take a few years to play out; in the meantime, we see many mitigating factors that the company can pursue to protect its competitive position and growth. We trimmed our positions in Alphabet and Microsoft by 1.5% each to fund the purchase of Oracle. They both remain top five holdings at the new weights.”