Where Will Alphabet Stock Be in 1 Year? Google parent company Alphabet (NASDAQ:GOOG) is among the many tech giants that saw its share prices plunge in 2022.
To see where the stock could go, it’s first important to look at its current valuation. Alphabet trades at 19.7 times expected earnings. This suggests that the stock is at least somewhat undervalued, as Alphabet’s P/E ratio typically runs well into the mid-20s. Alphabet also maintains a safe price-to-cash-flow ratio of about 14.85.
Another attractive aspect of Alphabet from a value perspective is its strong balance sheet. The company’s debt-to-equity ratio is an extremely safe 0.06, while its reserve of cash and cash equivalents as of Q3 was nearly $22 billion. This large cash stockpile will surely help Alphabet weather macroeconomic downturns while still giving it room to invest in further R&D.
Overall, Alphabet appears to be slightly undervalued. Its price-to-earnings growth rate is somewhat high at 1.74, indicating that it is trading at a premium to future growth. However, the rest of the company’s metrics are relatively positive, and Alphabet could be at least a decent buy for long-term value investors.
GOOGL Fair Value Is How Much?
The GOOGL fair value price from 44 analyst ratings is $123.20. If it reaches its intrinsic value, the stock has a single-year upside of 25.8 percent when compared to the current price of $97.96.
The range of price targets offered by individual analysts runs from $93 to $150, suggesting that analysts see much more upside than downside for Alphabet over the coming year.
In line with its higher expected share price, Alphabet is also expected to see its earnings and revenues grow in 2023. Earnings are projected to
rise nearly 11 percent in FY2023, and revenue is expected to increase by about 8 percent to $305 billion. Rising earnings should bolster investor confidence, driving Alphabet stock toward higher earnings multiples more in line with its recent history.
In terms of market share, however, Alphabet’s outlook may be slightly more negative. In 2022, both Meta and Alphabet saw their long-standing advertising moats narrow. Emerging competitors, especially TikTok, are slowly but surely
grabbing off market share from these previously unassailable giants. This could be a long-term problem, but Alphabet still appears to have room to grow alongside its competition.
What Could Drive Growth for Alphabet in 2023?
While search-based advertising is Alphabet’s bread and butter, the company is also continuing to expand other revenue streams.
One of the most promising business segments at the moment is YouTube. The video platform is rapidly transforming into a streaming service, complete with movies, series and sporting events that can be viewed on a paid basis. Given that the costs of operating the platform are already largely baked into Alphabet’s operations, the increased revenue from streaming could be a lucrative addition to the company’s business.
Alphabet is also making significant moves in the cloud computing space in an attempt to
compete with Amazon and Microsoft. Cloud services offer high margins and exposure to a rapidly growing base of customers.
The company is also continuing its long-term strategy of investing in artificial intelligence technology. AI has shown tangible results in improving Alphabet products, and the market for this technology could see massive growth over the coming decade. This focus could give Alphabet a distinct economic advantage over digital ad competitor
Meta, which is pouring much of its R&D budget into the far less certain world of
metaverse technology.
Headwinds for Alphabet Stock
Although Alphabet is a dominant tech firm that will likely continue to perform well over many years, the company is far from immune to short-term headwinds.
One of the most dramatic risks to Alphabet in 2023 may come from regulatory targeting of its advertising business. The US Justice Department, alongside eight state attorneys general, recently
initiated a suit claiming that Alphabet commanded an anti-competitive monopoly over online advertising.
If successful, this suit could force Alphabet to restructure Google’s most profitable business line. Although the odds of such a government-enforced breakup seem slim, the perceived risk could increase GOOGL share price volatility throughout the year and affect short-term performance.
Alphabet could also be affected by an economic downturn in 2023. If the macroeconomic climate continues to worsen, Alphabet could see slow or even slightly negative advertising revenue growth. However, it’s worth noting that the company is already getting out in front of this eventuality.
Alphabet recently laid off around 12,000 employees, suggesting that it is cutting back on headcounts to weather what could be a difficult time more easily.
Where Will Alphabet Be in 1 Year?
Although the stock could see significant turbulence from macroeconomic and regulatory factors in 2023, the most likely scenario appears to be that Alphabet will finish the year well above its current trading price. Continued investments in growing business lines, a return to earnings growth and a slight undervaluation all support the argument for higher share prices a year from now.
Due to the difficulties ahead, it’s likely wise for investors to use a more conservative estimate than the analysts price consensus for Alphabet’s returns this year. While 25 percent returns may not materialize, it seems quite reasonable to expect returns of 10-15 percent if earnings grow as projected.
With this said, it’s worth keeping in mind that Alphabet is still a fairly high-growth company. While the stock may generate outsized returns this year, the long-term growth story for Alphabet remains fairly promising. Investors who are willing to buy and hold Alphabet for longer periods of time will likely see better overall returns than those with a 12-month time horizon.
#1 Stock For The Next 7 Days
When Financhill publishes its #1 stock, listen up. After all, the #1 stock is the cream of the crop, even when markets crash.
Financhill just revealed its top stock for investors right now... so there's no better time to claim your slice of the pie.
See The #1 Stock Now >>
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.