You can be forgiven for thinking you missed the boat on Google parent Alphabet (GOOGL -0.27%) (GOOG -0.28%). The stock has risen 25% from its 52-week low, and the emergence of artificial intelligence-powered ChatGPT poses the first viable competitive threat to its search engine in years.

However, investors may not truly understand the nature of the company, or they may forget the existing reasons to buy Alphabet stock. Hence, they should look at Alphabet from a macro view before dismissing the company too quickly.

The true nature of Alphabet

For all the concerns about its place in search, Alphabet has evolved far from the ad-funded search engine that put it on the map. With a growing interest in other parts of the tech industry, it has worked for years to transition away from its advertising-dependent model. The company has not moved quickly in this endeavor, as 79% of Alphabet's revenue still came from ads in 2022.

Still, Google Cloud has emerged as its primary non-advertising source of revenue. It accounted for 9% of Alphabet's revenue in 2022, up from just over 7% in the prior year.

Moreover, analysts estimate that Alphabet owns numerous companies. These include health company Verily Life Sciences, artificial intelligence enterprise DeepMind, and autonomous driving company Waymo.

Alphabet has allowed most of these companies to operate under different names, and rarely does it break down the financials separately for these enterprises. Nonetheless, if advertising growth continues to slow, it should not surprise investors if some of these companies become more prominent within Alphabet.

Alphabet's other ace in the hole

If Alphabet's numerous companies cannot save it from an advertising slump, its balance sheet may. Its long-term success in advertising made it a wealthy company by any measure. Alphabet boasts nearly $114 billion in liquidity. While that is down from $140 billion in 2021, the cash hoard leaves Alphabet with considerable optionality.

Investors should not expect that cash position to fall by much. In 2022 alone, Alphabet generated about $60 billion in free cash flow. Hence, even if some fears about Google's competitive search position come true, Alphabet equipped itself to derive revenue from numerous other sources.

The state of Alphabet's stock

However, the price action in the Google parent does not seem to take a macro view into account. After reaching a (stock split-adjusted) high of over $152 per share in February 2022, the communication stock declined steadily amid the tech bear market and a slump in the digital ad industry.

Moreover, with worries about ChatGPT, the stock price fell into the $83 per share range, a drop of about 45% from peak to trough. The stock has recovered somewhat since November, though it still sells at a 30% discount from the high in early 2022.

Additionally, the price action has taken its price-to-earnings (P/E) ratio down to 23. This makes it a lower-cost stock than all of its mega-tech peers.

Chart showing Alphabet's PE ratio lower than several other tech companies' in 2023.

GOOG PE Ratio data by YCharts

Should I consider Alphabet?

Considering the macro state of the company, investors likely have a buying opportunity in Alphabet stock. Admittedly, it remains unclear when ad spending will recover, and ChatGPT presents a viable competitive threat to the search engine.

Nonetheless, even in the unlikely scenario where Alphabet loses its edge in these businesses, it holds numerous other business investments and a $114 billion cash hoard. Those two factors firmly position Alphabet for a long-term recovery, regardless of how the search and digital ad businesses perform.