Alphabet Enters Bear Market—Is It Time to Buy?

$162.75 +2.08 (+1.29%)

As of 12:50 PM Eastern.

This price reflects a fair market value as provided by Polygon.io.

52-Week Range

$146.08

▼

$207.05

Dividend Yield

0.49%

P/E Ratio

20.23

Price Target

$210.59

Alphabet Inc. (NASDAQ: GOOGL), the parent company of Google, has officially entered bear market territory. The company's shares have fallen over 20% from their all-time high in February.

A bear market is defined as a decline of 20% or more from a stock's peak, while a correction refers to a drop of 10%. Alphabet's recent decline has wiped out nearly a year of gains, bringing its stock price down to levels last observed in early 2024. Factors contributing to this downturn include broader economic trends, a drop in technology stocks, and disappointment following Alphabet's latest earnings report.

Investors are currently wary about the rising costs associated with artificial intelligence (AI) investments across the tech sector. Even though Alphabet is investing heavily in AI advancements, the market seems to be less forgiving of high expenditures when immediate returns are unclear.

The pressing question for investors is whether this significant decline signals a chance to buy or a sign of potential further losses.

Earnings Report Caused Investor Concerns

In early February, Alphabet's earnings report did not meet the high expectations set by the market. In the weeks leading up to this announcement, the stock had climbed to record highs as investors anticipated another quarter of impressive revenue growth.

However, the results fell short. Revenue slightly missed expectations, breaking a trend of positive surprises. Although Alphabet improved its profit margins, investors were anxious about the company's increased forecasted expenses, especially in AI infrastructure and cloud services.

This concern is common among major AI firms; while they continue to channel significant funds into AI development, the market is increasingly skeptical about how long it will take for these investments to be profitable.

For Alphabet, the stock's reaction after the earnings announcement suggests that investors are becoming more impatient compared to previous years.

Analysts Remain Optimistic

Current Stock Forecast for Alphabet

12-Month Stock Price Forecast:
$210.59
29.26% Upside

Moderate Buy
Based on 43 Analyst Ratings

Current Price	$162.92
High Forecast	$230.00
Average Forecast	$210.59
Low Forecast	$185.00

Despite these recent challenges, many analysts are still positive about Alphabet’s long-term prospects. KeyCorp recently reiterated its Overweight rating for the stock, setting a new price target of $202, indicating a potential upside of more than 25% from its recent close.

According to KeyCorp's analysis, Alphabet continues to exhibit robust revenue growth, increased cost efficiencies, and a strong presence in digital advertising and cloud computing. Even during tougher economic conditions, Alphabet remains profitable and is enhancing its competitive edge in AI services.

While many investors are currently shifting focus to more defensive investments, some analysts believe that Alphabet's recent decline has created an enticing entry point for long-term investment.

Is a Market Bottom Approaching?

Looking at technical indicators, Alphabet's stock appears to be oversold. The relative strength index (RSI) sits at 32, a level often seen before selling pressure slows down. Historically, when Alphabet reached similar RSI values, the stock experienced meaningful rebounds in the weeks that followed.

Furthermore, the MACD indicator is approaching a bullish crossover, indicating that momentum may shift soon. If buyers enter the market at current levels, it could signal the beginning of stabilization for the stock.

However, it's important to note that technical patterns do not guarantee an immediate reversal. If the overall market continues to decline, Alphabet might still face additional downward pressure before establishing a solid support level.

Is Now the Right Time to Buy Alphabet Stock?

Alphabet's recent drop has repositioned the stock to more favorable valuation levels. The case for long-term investment remains strong, supported by a modest P/E ratio of 20, record revenue figures, and improving profit margins.

Analysts continue to forecast upside potential, and technical indicators hint at a near-term rebound. Still, market sentiment appears fragile, and investors should brace for ongoing volatility in the short term.

For those willing to adopt a long-term perspective, this current dip could present a valuable buying opportunity before the returns on Alphabet's AI investments start materializing.

Alphabet, Bear Market, Investing