Alphabet: Shares Trading 13%-35% Below Fair Value

According to a sum-of-the-parts analysis, Alphabet's shares are potentially undervalued by 13% to 35%, prompting an analyst to move their $200 price target to the end of Q3. The valuation uses EV/Sales, comparing Alphabet’s segments to peers like Amazon and Meta. A key risk to this bullish outlook is the ongoing antitrust trial, with a decision expected by August 2025 that could negatively impact the stock.

Analysis

A sum-of-the-parts valuation analysis indicates Alphabet's shares (GOOGL) may be trading at a significant discount, estimated to be between 13% and 35% below fair value, reflecting a strongly positive sentiment towards the stock. This assessment has prompted the analyst to advance their $200 price target for GOOGL to the end of the third quarter from a previous year-end projection. The valuation methodology employed involves an Enterprise Value to Sales (EV/Sales) multiple comparison, benchmarking Alphabet’s distinct segments against comparable operations at Amazon, Microsoft, Snapchat, and Meta. Despite this bullish outlook, a substantial risk looms in the form of an ongoing antitrust trial; an unfavorable remedies decision, anticipated by August 2025, could materially pressure Alphabet's stock and temper the current positive outlook. The analyst discloses a beneficial long position in GOOGL through June 27, $180 strike call options, and is considering rolling these options contingent on market price action due to the proximity of their expiration date.

Key Decisions for Investors

• Investors should consider the potential 13%-35% undervaluation in Alphabet, as suggested by a sum-of-the-parts analysis and an advanced $200 price target to Q3-end, when evaluating or initiating positions.
• The significant downside risk from the ongoing antitrust trial, with a remedies decision expected by August 2025, must be closely monitored as it could materially alter the investment thesis if unfavorable.
• Market participants utilizing options on Alphabet may note the analyst's strategy of potentially rolling near-dated call options as a tactical approach to managing event risk and capturing upside potential.