Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has fallen significantly from its previous peak in recent months as concerns about new competition in search, overspending on artificial intelligence (AI) infrastructure, and the broader health of the economy have pressured the stock lower. The stock is now down 22% from its peak in July.
Some see a buying opportunity in that sell-off, and one Wall Street analyst recently weighed on with coverage on the stock.
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DA Davidson sees upside in Alphabet
DA Davidson initiated coverage on Alphabet with a neutral rating this morning, arguing that the core search business faces rising threats, and the valuation will rely more on the rest of the business, including Google Cloud, which has recently become profitable.
Davidson's analysts also said the company was at a crossroads with AI, and Alphabet and its big tech peers have acknowledged how high the stakes are in the new technology. Despite the overall cautiousness, Davidson gave the stock a price target of $170, implying an upside of 13% in the stock.
Is Alphabet stock a buy?
In addition to challenges for AI start-ups like Perplexity and now OpenAI's search product SearchGPT, Alphabet is also facing an antitrust trial after a judge found Google's search business to be an illegal monopoly.
Alphabet stock looks cheap, trading at a price-to-earnings ratio of 21. The company also has a history of rebounding from sell-offs, rewarding dip-buyers in the past.
Barring a significant antitrust ruling like a breakup, the stock seems like a good bet to recoup its recent losses as the business remains robust and growing.
Davidson makes a good point about the long-term risks facing the stock, but those could take years to play out.
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