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Why GOOG Stock near its 2022 low is tempting

  • After missing first quarter results last week, Alphabet (GOOG, GOOGL) the stock is trading just above the 2022 lows.
  • YouTube’s ad revenue has plummeted, but the company has still increased its overall revenue by 23% and its Pixel hardware may become a bigger factor in the future.
  • Investors should take advantage of the long-term growth potential of GOOG stock as long as its price remains low.

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Over the past five years, Alphabet Inc. (NASDAQ:GOOGNASDAQ:GOOGL) has been a safe bet as a growth stock. At least until last November, that was the case. Like just about every other growth stock in the tech sector, GOOG stock has been rocked by the market pullback that began late last year. Shares are now trading near their 2022 lows. They have essentially reset to May 2021 levels, giving up gains in the second half of 2021.

Some investors see this weakness as a signal to avoid GOOG stocks for the time being. That instinct was likely reinforced by last week’s missed first quarter results.

However, for investors focused on long-term growth, Alphabet continues to be a juggernaut. It may have lost some momentum since November, but this weakness is an opportunity. The company’s legacy businesses are still strong, and it continues to innovate rather than stand still. Buy GOOG stocks now, and you’re likely to enjoy big returns when stocks rally and then return to growth mode.

No need to panic about Alphabet’s Q1 Miss

Alphabet suffered a shortfall on April 26, and the market responded by driving down GOOG shares.

Admittedly, the 1st quarter news was not awesome if you are an Alphabet shareholder. Overall revenue was $68.01 billion, up 23% year-over-year (YOY). However, this fell short of analysts’ expectations. YouTube’s ad revenue in particular was a sore spot, suffering from increased competition in the social media video market. The company has also felt the effects of the shutdown of its operations in Russia. Earnings per share (EPS) of $24.62 also missed analysts’ projections and fell from EPS of $26.29 reported a year earlier.

However, given the current climate, the results could have been much worse. And there were positive signs to be found, including significant revenue growth in the company’s Other Bets and Google Cloud divisions.

Watch the Pixel hardware line for future growth

With Alphabet, there is a solid base of business in search and advertising revenue, as well as future leading growth engines like Google Cloud. And you never know what will come out of the Future Bets division.

However, I want to point out one area that tends to get little recognition: Google’s Pixel hardware.

After years of false starts, the company finally succeeded with last year’s Pixel 6 series smartphones. Last year, despite supply chain challenges, the Pixel 6 set all-time sales records for Google. Expect the company to build on that success with this year’s Pixel 7 smartphone.

We are also waiting for Google to officially announce its first Pixel smartwatch. We know it happens – the device was exposed in regulatory findings and a prototype was accidentally left in a restaurant. It’s not going to make or break GOOG’s stock, but look what rival Apple (NASDAQ:AAPL) did with the Apple Watch. The smartwatch helped propel the company’s Wearables division to $8.8 billion in revenue last quarter.

Much of Apple’s future growth is tied to leveraging its large installed user base of devices to sell services. With Alphabet, the sheer number of devices running Google’s Android operating system provides an opportunity to sell these users high-end Pixel hardware. To be clear, Pixel hardware will never rival ad revenue as a driver of GOOG stock growth, but it does add resilience. And it shows that the company continues to innovate.

Conclusion: Should You Buy GOOG Stock?

The bottom line about GOOG stocks is that whenever they drop in value, they should be seen as a buying opportunity. Ask the investment analysts interviewed by the the wall street journal and you will find an extremely solid support for Alphabet. GOOG stock is rated as a consensus “buy” by an overwhelming majority. The group’s 12-month average price target of $3,307.53 shows optimism that the 2022 crisis won’t last forever. This also suggests a very steep 35% upside.

Some concerns surfaced in Alphabet’s first-quarter revenue, namely a loss of advertising revenue from YouTube. However, this was more than offset by growth in other areas, including growing revenue from Google Cloud.

Going forward, don’t underestimate the potential for hardware sales, including Pixel smartphones and smartwatches. As Apple has shown, hardware can become a very lucrative business if you do it right.

At this point, GOOG stock is down more than 15% in 2022 and is currently just above its lowest close for this year. From my perspective, with Alphabet’s long-term growth potential, any risk of GOOG continuing to slide this year is worth it.

As of the date of publication, Brad Moon had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

Brad Moon has written for InvestorPlace.com since 2012. He also writes on stocks for Kiplinger and has been a senior consumer technology contributor for Forbes since 2015.