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Alphabet Stock Price Is Undervalued; More Upside is Ahead

Alphabet (NASDAQ: GOOG) stock price continues to trade in a narrow range over the last twelve months. The stock price has been experiencing hurdles in breaching $1300 level. It traded in the range of $1000 to $1200 level during the last twelve months.

On the other hand, the company has generated solid growth in financial numbers. Its stock looks undervalued amid sluggish stock price performance along with robust financial numbers.

GOOG Alphabet Inc. weekly Stock Chart

Its price to earnings ratio declined to 23 compared to 38 times in fiscal 2018. Similarly, its price to sales and price to book ratios eased significantly when compared to previous years.

Meanwhile, market analysts are optimistic about Alphabet stock price upside potential. Deutsche Bank has lifted its stock price target to $1,400 to $1,475 with Buy ratings. The firm says stronger than expected growth in the second-quarter revenue is the indication of growth trends.

Loop Capital raised the price target to $1,350, citing reacceleration in websites revenue growth. The firm claims that Google’s cloud revenue and capital returns are supporting future fundamentals.

Alphabet has generated year over year revenue growth of 19% in the second quarter. The revenue growth is driven by higher than expected revenues from Google Properties and Google Ads segments. Its operating income and earnings per share also grew at a high double-digit rate.

Sundar Pichai, Chief Executive Officer of Google said, “From improvements in core information products such as Search, Maps, and the Google Assistant, to new breakthroughs in AI and our growing Cloud and Hardware offerings, I’m incredibly excited by the momentum across Google’s businesses and the innovation that is fueling our growth.”

The company has also launched a new share buyback program of $25 billion. The massive share repurchase plan highlights management’s confidence in future fundamentals. Share buybacks always offer support to share price and earnings per share. On the whole, financial numbers and analysts rating suggest that Alphabet stock price is undervalued and it is well set to form a bullish trend.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.