Apple (AAPL 1.09%) and Palantir Technologies (PLTR +3.03%) have a combined market capitalization of $3.8 trillion as of now. So, for a stock to be worth more than both of these companies combined would be an incredible feat. However, there's one obvious candidate to achieve this feat, and it could be one of the best stocks to buy right now.
Alphabet (GOOG 0.87%) (GOOGL 0.75%) is perhaps the most undervalued big tech stock right now, and it has the potential to be worth more than both of these companies combined if the market gives the stock the respect it deserves and its growth initiatives continue to pan out.
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Alphabet is turning AI headwinds into a tailwind
Alphabet is a massive conglomerate, but most of its ecosystem has been built around the Google Search engine. This division accounted for over half of Alphabet's revenue in Q2, showcasing its massive importance to the overall business.
However, there's an expectation from the investing community that generative AI will replace the Google Search engine. Many already made this switch, and there's fear that an increasingly larger cohort could do the same. The only problem with this sentiment is that Google may have figured out how to bridge the gap between a full-on generative AI experience and a traditional internet search. It incorporated AI overviews, which provide a generative AI-powered summary at the top of nearly every Google search. This has become an incredibly popular feature, according to management, so Alphabet is continuing to invest in and deploy this product. Furthermore, management noted that it has about the same monetization as a traditional Google Search, so it isn't affecting its finances.
NASDAQ: GOOGL
Key Data Points
This was evident in Q2, as Google Search's revenue increased by 12% year over year. Considering the maturity of this business unit, that's solid growth that investors should be pleased with.
Alphabet also has other divisions that are putting up impressive growth, with Google Cloud and Waymo among them. Overall, its revenue rose at a 14% pace in Q2, and its diluted earnings per share rose at a 22% clip.
That growth ranks Alphabet alongside most of the big tech companies, but the issue is that it doesn't receive a premium valuation like its peers.
Alphabet would be worth more than Apple and Palantir combined on an even playing field
For Alphabet to be worth more than Apple and Palantir combined by 2030, the market will need to assign it a respectable multiple. Currently, Alphabet trades for 22.5 times earnings, yet has outpaced Apple's earnings-per-share growth for essentially two years.
AAPL EPS Diluted (Quarterly YoY Growth) data by YCharts
If Apple and Alphabet were assigned the same multiple, Alphabet would be the larger company by far, as Alphabet generated $116 billion in net income over the past year while Apple has produced $99 billion. So, if Alphabet received Apple's premium, it would be worth a jaw-dropping $4.1 trillion, which exceeds the combined market cap of Palantir and Apple right now.
Alphabet is an undervalued and underappreciated stock, despite posting strong growth in the face of significant headwinds. This makes Alphabet one of the most resilient stocks on the market. With a combination of its valuation rising and continued strong earnings growth, it can easily be worth more than Apple and Palantir combined by 2030. As a result, I believe it's an excellent stock to buy, as investors can generate profits from owning it in multiple ways.
