Here's Why I'm Buying Alphabet Stock Like There's No Tomorrow

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) doesn't get the same respect as its big tech peers. These stocks all trade at a premium to the market, as measured by the S&P 500 (SNPINDEX: ^GSPC), while Alphabet does not. There is a lot of pessimism that Alphabet's primary cash cow, the Google search engine, could be losing its dominance, threatening the company as we know it today.

However, the numbers don't back this up. Google Search is still dominant and making a ton of money. Because of Alphabet's strong financial picture and cheap price, it's an excellent stock to load up on right now.

Image source: Getty Images.

Alphabet is still dominant in the search market

Most of the concern about Alphabet losing market share involves users switching to alternatives, such as generative AI models. Regardless of which one they use, each time a generative AI model is asked a question, it is one time that Google isn't able to place ads in front of a user. This threatens a core part of the company's business because it gets 56% of its revenue from search.

We've seen Google's market share slip a bit, dropping below 90% for the first time since 2015 earlier this year. Still, this doesn't mean the financial picture is trending in the wrong direction, as Google Search revenue rose 10% year over year in the first quarter.

One thing helping Google maintain its position is the introduction of AI search overviews, which bridge the gap between a traditional Google search and using a generative AI model. Management has discussed how popular the feature is, and it is going to continue developing it.

Although the forecast for Google's market share isn't particularly great, it's still doing an excellent job with its business. I think the market is underestimating the fact that most consumers aren't going to switch away from Google unless something much better is launched. This will protect Alphabet's mindshare and ensure that it continues producing solid results.

The first quarter's results were truly fantastic and did not indicate a company that was struggling at all.

Alphabet's stock is far cheaper than its peers despite similar or better results

In that quarter, overall revenue increased 12% year over year, and diluted earnings per share (EPS) increased 49% year over year. If all I presented were those growth rates and its valuation, you would think it's an incredibly undervalued stock. But because Alphabet's name is attached to the stock, it trades at a hefty discount to the market and its peers.

GOOG PE Ratio (Forward) data by YCharts; PE = price to earnings.

With the stock trading at a mere 18.6 times forward earnings, it's far cheaper than the S&P 500, which trades at 22.9 times forward earnings. The results become even more eye-opening compared to some of its peers in big tech.

Data source: YCharts. Note: All growth rates were taken from each company's last reported quarters.

Alphabet is posting results similar to these other three, yet it trades for a massive discount compared to them. This makes me conclude one of two things: The other big tech stocks are overvalued, or Alphabet is undervalued. Both can be true, but what matters is what investors do with their money.

Alphabet is a great stock right now, as it combines growth and value well. This combination could provide explosive returns in the future, making it one of my best stocks to buy.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Keithen Drury has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.