Raymond James thinks Google stock is still cheap. Is it right?
Alphabet (GOOGL +2.73%) (GOOG +2.70%) stock gained 2.8% through 11:50 a.m. ET Friday after Raymond James analyst Aaron Kessler hiked his price target to $275 per share on the Google parent company (which he rates “outperform”).
Image source: Alphabet.
Google AI news
Artificial intelligence company Anthropic announced yesterday it will use over 1 million specialized AI “Tensor Processing Units” from Google to provide more than one gigawatt of computing capacity for Anthropic’s own Claude AI service. This news presumably got today’s rally started, as it broke only after close of trading Thursday.
This morning, Alphabet stock found its second catalyst when Raymond James’ analyst described himself as “incrementally more bullish on search revenues” at Google, and said he is raising his earnings forecasts for both 2025 and 2026. Kessler noted that even valuing Alphabet stock at 21.5 times forecast 2027 earnings gives Alphabet stock a “30% discount vs. AI Winners” such as Nvidia, Microsoft, and Oracle — making the analyst’s forecast look downright conservative.
Today’s Change
(2.70%) $6.86
Current Price
$260.59
Key Data Points
Market Cap
$3069B
Day’s Range
$256.09 – $262.47
52wk Range
$142.66 – $262.51
Volume
975K
Avg Vol
22M
Gross Margin
58.92%
Dividend Yield
0.00%
Is Alphabet stock a buy?
A more aggressive price target, says Kessler, could see Alphabet shares priced as high as $350, or as much as 34% more than the stock costs today.
I’m not sure I agree with that, however.
With Alphabet priced at over 26 times earnings today, most analysts forecast it will grow earnings at no better than 15% annually over the next five years. That’s not cheap. Free cash flow also looks poor as Alphabet pours more and more cash into money-losing AI ventures, with the result that Alphabet now generates less than $0.58 in cash profit for every $1 it claims to “earn.”
From where I sit, Alphabet doesn’t look like a “buy” on either its GAAP earnings valuation or its free cash flow. I’m almost tempted to call Alphabet stock a “sell.”
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
