Alphabet(GOOGL.US) surged 38%, surpassing Apple Inc. Is Microsoft Corporation's valuation already reaching its ceiling?

The parent company of search giant Alphabet Inc. Class C, Alphabet (GOOG.US, GOOGL.US), has surged nearly 38% in the past 12 months, outperforming Apple Inc. (AAPL.US) and Microsoft Corporation (MSFT.US). As Alphabet's stock price reaches a historical high of around $200 per share, analysts have begun to worry about whether its valuation has hit a peak. Overall, Wall Street remains bullish on Alphabet, with the average target price at an all-time high. After Alphabet easily exceeded market expectations for revenue and profit in the third quarter of 2024, several brokerages including Morgan Stanley, Evercore ISI, Jefferies Financial Group Inc., and Wedbush reiterated their bullish stance on Alphabet and raised their target prices. Despite Alphabet's recent surge in stock price, the relative valuation appears to favor the stock's long-term prospects. Stone Fox Capital, head of Seeking Alpha Investment Group, stated this week: "Despite the high valuation, this stock remains attractive, especially compared to other tech giants." He reiterated his "strong buy" rating on Alphabet. The analyst believes that Alphabet's expected P/E ratio is around 22 times, while Apple Inc. and Microsoft Corporation's expected P/E ratios are both around 30 times. Seeking Alpha analyst Star Investments also made a similar point. Compared to peers like Amazon.com, Inc. and NVIDIA Corporation, Alphabet has the lowest P/E ratio, and the stock price of Alphabet is at a significant discount to its 7-year and 10-year median P/E ratios. Star Investments added, "Investors who are interested in purchasing robust growth opportunities at a reasonable price and with strong risk tolerance should consider buying Alphabet now." Seeking Alpha analyst Luca Socci believes that the value of Alphabet's autonomous taxi division is not fully reflected in the company's market value. Socci stated this week, "Alphabet appears to be undervalued, with potential for multiple expansion, especially if Waymo continues to maintain its growth trajectory." However, some analysts remain skeptical. DT Invest recently gave Alphabet a "hold" rating, stating, "The stock is currently around $190 per share, and the valuation seems almost perfect. In other words, the upside potential from current levels is very limited." Seeking Alpha analyst Hunting Alpha believes that Alphabet's stock faces resistance and gives it a "hold" rating. TipRanks data shows that Wall Street analysts give Alphabet (GOOGL.US) a "strong buy" rating, with an average target price of $212.64, which is 11% higher than the current stock price level.