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Parent company of Google and YouTube alphabet (NASDAQ:googleNASDAQ:Google) is a member of the Magnificent Seven or “Mag-7,” but GOOG stock hasn't had the best performance recently. However, we still assign the stock a 'B' grade because Alphabet can still deliver superior value to shareholders.
Of course, Alphabet's Google dominates the US search engine market. Additionally, the company generates strong revenue from Google Cloud. Admittedly, Google recently stumbled with the rollout of a new generative artificial intelligence chatbot. Alphabet continues to make headway in a niche auto market with growth potential.
GOOG stock decline and Gemini’s stumbling block
Investors always say they buy stocks when they're down. But when they finally get a good fall, they are afraid to take action. They know the company is in trouble, but stock prices rarely go down without some sort of problem occurring.
The recent decline in Alphabet stock from $155 to $136 can be attributed, in part, to Alphabet's less-than-high-profile rollout of its Gemini gen-AI chatbot. Apparently, Gemini has been accused of giving biased answers to some questions.
If you're investing in GOOG stock, you'll need to be patient with Alphabet. Google CEO Sundar Pichai reportedly assured that the company is working “around the clock” to correct the Gemini bias.
Alphabet won't dominate the AI generation wars next week or next month. Meanwhile, Alphabet's stock is trading at a more favorable price point as these issues spook some investors.
As Boston Partners fund manager David Cohen put it, Alphabet's stock trades at a “low multiple for an extraordinary business.”
In case you're wondering what that “low multiple” is, Alphabet's generally accepted accounting principles give it a trailing 12-month price-to-earnings ratio of 23.34. This is not unusually high, especially for his Mag-7 company.
Is the market ignoring Waymo's value?
Some investors are worried about Gemini, but perhaps they're overlooking the value Waymo brings to Alphabet. Waymo is an Alphabet company that makes self-driving taxis (also known as robotaxis).
Pardon the pun, but Waymo is making more “Waymo” progress than you might expect. In fact, Waymo's driverless taxis are currently permitted to operate in Los Angeles, Santa Monica, Beverly Hills, and several other California cities.
Additionally, Waymo's robotaxis can operate in Austin, Texas, and Phoenix, Arizona.
Perhaps the public is starting to embrace the idea of driverless taxi services.Recent reports from Los Angeles Times It seemed to convey an overall positive tone about Waymo. Over time, Waymo could become a significant revenue source for Alphabet.
GOOG stock: You don't have to own it, but you should consider it
How would you react if Alphabet's stock price went down? Focus on Gemini's problems? Or do you calmly weigh the risks and potential rewards of owning Alphabet stock?
Overall, GOOG stock earns a 'B' grade, and there's no need to own it. However, at least consider whether Alphabet can recover from its initial failure with Gemini.
Perhaps the alphabet will recover and Gemini will improve. Alphabet will continue to make money from Google Search and Google Cloud.
On top of that, Waymo could provide significant value to Alphabet in the long run. Therefore, we recommend doing your due diligence and determining whether Alphabet stock is right for your portfolio.
On the date of publication, neither Louis Navellier nor the InvestorPlace research staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
