The Cheapest "Magnificent Seven" Stock to Buy Before It Vaults 26% Higher, According to 1 Wall Street Analyst

Alphabet Inc. (GOOGL), the tech giant behind Google, is currently the cheapest "Magnificent Seven" stock to buy, according to one Wall Street analyst. With a potential upside of 26% over the next year or so, investors may want to consider adding this stock to their portfolios. But before making a decision, let's dive into the reasons behind this analyst's bullish stance and explore the risks associated with this investment.



Why Alphabet Inc. (GOOGL) is a compelling investment opportunity

1. Undervalued valuation metrics: Alphabet has the lowest forward PE multiple of 22.56x among the Magnificent Seven stocks, indicating that it is currently undervalued compared to its peers. Additionally, its PEG ratio of 1.29x is lower than the other stocks in the group, further supporting the notion that Alphabet is a bargain.
2. Strong AI prospects: Despite the recent concerns about the U.S. Department of Justice's (DOJ) antitrust lawsuit and upstart search engine competitors like OpenAI's ChatGPT, Alphabet's core business has strong AI prospects that many investors may be overlooking. The company's efforts to improve cost efficiencies and the higher profitability exhibited by its cloud business make it an attractive investment opportunity.
3. Analyst optimism: Wall Street analysts, such as Phillip Securities Jonathan Woo, have issued bullish price targets for Alphabet stock. Woo's $240 price target implies a potential upside of approximately 33% over the next year or so. Other analysts, such as Wolfe Research and Wedbush, have also raised their price targets for the stock, reflecting their optimism about the company's prospects.
4. AI thesis is intact: Despite the recent headwinds, the AI thesis for Alphabet remains intact. The company's investments in AI are expected to deliver almost instant ROI, and its ability to grow its AI offerings is likely to drive future growth. Moreover, the DOJ's lawsuit is unlikely to result in a monumental change to the company, as judges typically prefer a more surgical approach to remedying issues.



Risks to consider before investing in Alphabet Inc. (GOOGL)

While the bullish case for Alphabet is compelling, investors should also be aware of the risks associated with this investment:

1. Antitrust lawsuit: The ongoing antitrust lawsuit against Alphabet could result in significant fines or even a breakup of the company. Although analysts believe that the DOJ's request for Google to sell its Chrome browser is unlikely, the outcome of the lawsuit remains uncertain.
2. Competition in search engines: Upstart search engine competitors like OpenAI's ChatGPT pose a threat to Alphabet's dominant position in the search engine market. If these competitors gain traction, it could negatively impact Alphabet's advertising revenue and overall business.
3. Market concentration: The Magnificent Seven stocks, including Alphabet, represent about one-third of the overall value of the broader benchmark S&P 500. This concentration could make the market more vulnerable to a correction led by a sell-off in these stocks.



In conclusion, Alphabet Inc. (GOOGL) is the cheapest "Magnificent Seven" stock to buy before it vaults 26% higher, according to one Wall Street analyst. With its undervalued valuation metrics, strong AI prospects, and analyst optimism, Alphabet presents an attractive investment opportunity. However, investors should also be aware of the risks associated with this investment, such as the ongoing antitrust lawsuit and competition in search engines. By carefully considering these factors, investors can make an informed decision about whether to add Alphabet to their portfolios.