google share price
Tariff Clarity Could Bring a Turnaround in Beaten-Down Growth Stocks Like Alphabet
With a significant round of tariffs scheduled for later today, there is an expectation that this will bring clarity to the markets, potentially leading to a rally in growth stocks that have been underperforming, such as Alphabet Inc. (GOOGL). The stock has faced recent pressures; however, its valuation appears attractive, and its strong fundamentals may enable it to benefit from a more stable market environment.
Tariff Clarity: A Potential Catalyst
The resolution of tariff-related uncertainty could alleviate concerns regarding global trade disruptions, which may positively impact GOOGL’s international revenue and advertising business. The stock has recently bounced off a critical support level of $152, suggesting it is positioned for a potential rally. This situation may present an appealing opportunity for investors looking to gain exposure to a high-quality growth stock in a recovering market.
Favorable Fundamentals and Valuation
The timing for increasing bullish exposure to GOOGL seems optimal, especially as the stock has shown positive divergence in momentum indicators. This could imply that selling pressure is diminishing, indicating a possible swift rally as market uncertainty surrounding tariffs decreases. Furthermore, GOOGL is currently trading at a notable discount compared to its industry peers, despite exhibiting growth metrics that align with industry standards and demonstrating superior profitability.
Key Financial Metrics
– Forward PE Ratio: 17.6x vs. Industry Median 21.3x
– Expected EPS Growth: 13.84% vs. Industry Average 13.09%
– Expected Revenue Growth: 11.01% vs. Industry Average 11.46%
– Net Margins: 28.60% vs. Industry Average 15.06%
Bullish Thesis
1. **Tariff Clarity:** The tariffs set for today are anticipated to clarify market conditions, potentially serving as a catalyst for a rally in GOOGL and similar growth stocks.
2. **Strong Fundamentals:** GOOGL’s valuation, with a forward PE of 17.6x, is attractive compared to the industry average of 21.3x, alongside superior net margins of 28.60%.
3. **Global Exposure:** A resolution of tariff uncertainties could enhance GOOGL’s international revenue streams, particularly benefiting its advertising sector.
Trade Strategy
To capitalize on a potential bounce in GOOGL, a May 16, 2025, $160/175 Call Vertical is being considered at a debit of $4.96. This involves:
– Buying the May 16, 2025, $160 call at $6.95.
– Selling the May 16, 2025, $175 call at $1.99.
The maximum reward is $1,004 if GOOGL exceeds $175 at expiration, while the maximum risk is $496 if it falls below $160. The breakeven point for this trade is $164.96.
Event Promotion
Join us at the New York Stock Exchange for CNBC Pro LIVE on June 12, 2025. This inaugural event will provide insights from experts and networking opportunities with CNBC professionals.
Disclaimer
All opinions expressed by CNBC Pro contributors are solely their own and do not reflect the opinions of CNBC or its affiliates. This content is for informational purposes only and does not constitute financial, investment, tax, or legal advice. It is advisable to consult with a financial advisor before making any financial decisions.