Google and YouTube parent company Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) delivered outstanding value to its shareholders this year. GOOG stock provided exposure to the artificial intelligence (AI) technology market and rallied sharply. However, there’s no need to be greedy in December, so just hold your current Alphabet shares for a while.
Remember, just because Alphabet is a member of the “Magnificent Seven” club, doesn’t mean the company is problem-free. It’s perfectly fine to hold Alphabet stock for the long term, but don’t be too eager to buy shares now. Remember, knowing when not to add to your stock position is just as important as knowing when to buy stocks.
Did GOOG Stock Get Ahead of Itself?
Even though the year isn’t finished yet, it’s easy to see why Alphabet has been a “Magnificent Seven” technology company in 2023. GOOG stock started off the year at around $90 but entered December above $130.
Recently, Alphabet actually had a GAAP trailing 12-month price-to-earnings ratio of 25.44x. This is substantially higher than the sector median P/E ratio of 17.28x.
Traditional valuation metrics aren’t the be-all and end-all, mind you. Yet, the company’s relatively high valuation suggests that there’s no urgent need to load up on Alphabet stock right now.
Keep in mind that Alphabet has issues to deal with, not just in the U.S. but also in other countries. For example, the company is going to pay a whopping $100 million CAD, or around $73.6 million, every year to Canadian news publishers just to keep Google’s news stories in Canadian search results.
Canadian Prime Minister Justin Trudeau praised the agreement, saying, “Google has agreed to properly support journalists, including local journalism.” This may be true, but it’s another example of how Alphabet has to spend money to put out legal fires in multiple regions of the world.
An Issue That Could Weigh on Alphabet Stock
Meanwhile, Alphabet continues to deal with legal/regulatory battles in its home country. Throughout 2023, some eager GOOG stock investors have conveniently ignored an ongoing anti-monopoly trial involving Google.
This is an issue that could easily continue into the second half of 2024. The U.S. Justice Department’s legal case against Google could take a major financial toll on Alphabet. After all, it’s not cheap or easy to fight a legal battle against the U.S. government.
The closing arguments for this antitrust case are reportedly set for May of next year. To be honest, Google has a seemingly unbreakable monopoly over the U.S. search market. Reportedly, Google’s share of this market has stayed between 83% and 91% since 2015.
I recommend waiting a few months at least, especially if you’re thinking about loading the boat on Alphabet stock today. Just imagine the financial fallout if Alphabet has to break up Google because it’s too powerful in the search engine market. In that case, Alphabet’s valuation and market capitalization could deflate like a popped balloon.
GOOG Stock: Know When to Buy and When to Wait
Alphabet had a truly “magnificent” 2023. If you already own a moderately sized position in Alphabet stock, it’s fine to hold on to your shares.
Alternatively, you might choose to take some profits, since Alphabet’s valuation is fairly rich now and Google is vulnerable to legal issues. Wait at least a few months for further updates on Google’s regulatory battles if you’re considering taking a large stake in GOOG stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
