Alphabet Inc. Stock Analysis: Short-Term Recovery Possible Amid Legal Challenges and Undervaluation

Technical Analysis

Alphabet Inc.'s stock performance on February 24, 2025, closed at $179.29, showing a slight decrease of 0.21% from the previous day. The stock's low and high on the same day were $178.89 and $183.12, respectively. Notably, the stock is trading below its 50-day moving average of $192.01, suggesting short-term bearish momentum. However, it is slightly above the 200-day moving average of $175.70, providing some long-term support. The Relative Strength Index (RSI) is at 25, indicating that the stock is currently oversold, which may hint at a potential price rebound in the short term. The Moving Average Convergence Divergence (MACD) at -3.11 suggests continued bearish sentiment over the last three months. Key support and resistance levels are observed at $175.37 and $191.33, respectively, providing potential trading thresholds.

Fundamental Analysis

Alphabet's market capitalization stands at approximately $2.20 trillion, and it has a price-to-earnings (PE) ratio of 22.27 with earnings per share (EPS) at $8.05 for the trailing twelve months. The stock yields a dividend of 0.33% based on TTM, which may appeal to income-focused investors. The recent legal challenges, including a lawsuit from Chegg, could impact investor sentiment negatively, especially if similar actions arise, but their financial impact may be limited in the short term. A pending $27.29 million annual compensation verdict in South Africa could also weigh on future earnings. Analysts provide a strong consensus towards a "Buy" rating with targets ranging from $170 to $225, suggesting a bullish long-term outlook, underlined by a favorable discounted cash flow (DCF) valuation of $249.04.

Short-term Stock Performance Predictions

For the next trading day and upcoming week, given the recent decline yet oversold RSI, a short-term recovery is plausible as traders react to the oversold conditions. However, any further developments in lawsuits or market fluctuations could influence this trajectory. Increased volume above the average suggests heightened interest and could potentially drive volatility.

Intrinsic Value and Long-term Potential

Alphabet's discounted cash flow valuation at $249.04 significantly surpasses the current trading price, implying an undervaluation and attractive long-term growth potential. The company's robust market position, diverse revenue streams, and focus on AI and cloud computing reinforce its value proposition. While current legal issues pose minor risks, they are unlikely to alter the fundamental strengths.

Overall Evaluation

Alphabet Inc. can be considered a 'Hold' candidate for those focusing on the short term amid current volatility and legal uncertainties. For investors with a long-term perspective, the fundamental strength, stock undervaluation, and promising future prospects suggest a positive investment scenario. Nonetheless, investors should remain vigilant about ongoing legal challenges and market responses.