Is Google Parent Alphabet the best Magnificent Seven stock to buy right now?

Can Google parent Alphabet (NASDAQ:GOOG) (NASDAQ: GOOGLE) keep up with growing competition in the search engine and cloud services markets? This week, the company answered that question with an exclamation point.

Alphabet announced third-quarter results on Wednesday. The tech giant reported revenue of $88.3 billion, up 15% from last year and beating the consensus estimate of $86.3 billion from analysts surveyed. LSEG. Earnings per share (EPS) were $2.12, beating the average estimate of $1.85. It’s no surprise that Alphabet shares jumped on the back of better-than-expected results.

The best alphabet? Promotion “The Magnificent Seven” buy right now? At least it’s a strong “maybe.”

Extraordinary impulse

Alphabet and Google CEO Sundar Pichai began his third-quarter earnings call by saying, “The momentum at the company is incredible.” While CEOs are always supportive of their companies, Pichai’s enthusiasm appears to be justified. Artificial intelligence (AI) is the main reason for his optimism.

After the launch of OpenAI’s ChatGPT, skeptics predicted that generative AI could be the Google killer. About two years later, we see a completely different reality. Google’s AI Reviews feature, which combines generative AI and a search engine, now reaches more than 1 billion monthly users.

Fears that this would hurt the company’s profits were exaggerated. Pichai said during the third quarter conference call that Google has reduced machine costs per query by more than 90% over the past 18 months. He added: “Integrating advertising into AI reviews also works well in helping people connect with businesses during their searches.”

Alphabet’s Google Cloud business is booming. The cloud division earned $11.4 billion in the third quarter, up 35% from last year. Google Cloud is now a major contributor to the company’s overall profitability.

Concerns about threats to YouTube from competitors like TikTok have also proven to be more smoke than fire. YouTube’s third-quarter advertising revenue jumped 12% year-over-year to $8.9 billion. Over the past four quarters, YouTube generated more than $50 billion in combined advertising and subscription revenue for the first time in its history.

Alphabet’s Waymo unit now transports more than 150,000 paying customers and drives more than 1 million miles per week—all completely autonomously. Pichai said: “Waymo is now a clear technical leader in the automated vehicle industry and is creating growing commercial opportunities.”

AI is also hugely important to Alphabet internally. More than 25% of new code created at Google is now created by artificial intelligence. Of course, engineers review the code before accepting it. However, this is an important milestone in improving the company’s productivity.

Best Magnificent Seven Stocks?

Does this momentum make Alphabet the best “Magnificent Seven” stock? Not necessarily. Other members of the Magnificent Seven are also experiencing strong AI tailwinds. However, Alphabet compares favorably with some of them.

Microsoft reported strong revenue growth in its latest quarterly report. But the company’s shares fell after reporting earnings this week due to lower-than-expected guidance.

Meta platforms Third-quarter earnings beat Wall Street forecasts. However, its shares fell due to analysts’ concerns about significant growth. capital costs next year.

Tesla The company’s shares soared after the company announced better-than-expected earnings and an upbeat outlook for 2025 last week. However, its shares are still significantly behind Alphabet’s performance this year.

Amazon And Apple has not reported its quarterly results as of this writing. But no matter how impressive their numbers may be, Alphabet beats them both on one important front: valuation. alphabet price-earnings-growth (PEG) ratio 1.16 is well below Amazon and Apple’s forward earnings multiples.

I think the Magnificent Seven stocks that give Alphabet the best returns right now are Nvidia. However, it’s still a mystery how much growth Nvidia will report in its third-quarter update scheduled for November 20th.

Dark alphabet cloud

Perhaps the main factor that could prevent Alphabet from becoming the best Magnificent Seven stock to buy right now is the uncertainty surrounding antitrust lawsuits. A federal judge has already ruled that Google monopolizes the search engine market. Another lawsuit, filed by the U.S. Department of Justice and several states, alleges that the company also has a monopoly on its online advertising technology.

It is possible that Alphabet could break up as a result of these antitrust actions. Even if not, the company may be forced to change its business practices in a way that harms its long-term growth prospects.

Alphabet’s current momentum is impressive enough to place it in the upper echelon of the “Magnificent Seven” stocks, if not the very top. However, the dark cloud hanging over the company with its antitrust risks somewhat diminishes its brilliance.

Is it worth investing $1,000 in Alphabet right now?

Before you buy Alphabet stock, consider this:

Motley Fool Stock Advisor a group of analysts have just determined what they believe is 10 best stocks so investors could buy now… and Alphabet wasn’t one of them. The 10 shorted stocks could deliver huge returns in the coming years.

Think when Nvidia compiled this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you will have $853,860!*

Stock Advisor provides investors with an easy-to-follow plan for success, including portfolio construction guidelines, regular analyst updates, and two new stock picks each month. Stock Advisor the service has more than four times return of the S&P 500 since 2002*.

View 10 stocks »

*Stock Advisor returns as of October 28, 2024.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former chief market development officer and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, chief executive of Alphabet, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Alphabet, Amazon, Apple, Meta Platforms and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 Microsoft calls and short January 2026 $405 Microsoft calls. The Motley Fool has disclosure policy.