This Magnificent 7 Stock Is Absurdly Cheap – It Probably Won't Stay That Way For Long

Alphabet Corp. GOOGL, one of the most dominant players in the Magnificent 7 tech group, is now trading at a price-to-earnings ratio that's historically associated with powerful stock rallies, setting up what could be a rare buying opportunity.

What Is A P/E Ratio And Why Does It Matter?

The price-to-earnings ratio (P/E) measures how much investors are willing to pay for each dollar of a company's profit.

A lower P/E can signal that a stock is undervalued relative to its earnings, especially when compared to its historical average or industry peers.

As of July 2, Alphabet trades at 19.8 times its trailing 12-month earnings. That’s 16% below its 20-year average of 32, putting it near valuation levels rarely seen over the past two decades.

How Rare Is This Valuation Level For Alphabet?

The last time Alphabet traded at this low a P/E ratio was in May 2025, when it briefly touched 17.1x. That was just shy of the record low of 16.2x seen on November 12, 2008, during the depths of the financial crisis.

Other low-P/E episodes include June 2011, March 2012 and September 2022.

Each of those moments came before significant long-term rallies in the stock.

What Happened To Alphabet Stock After Previous Low P/E Readings?

Historical data suggests that buying Alphabet at discounted valuations has been a profitable long-term strategy.

Every time its price-to-earnings ratio (P/E) fell below 20 in the past two decades, investors who stayed the course for a year or more reaped far better returns than usual.

After hitting its record-low valuation in 2008, Alphabet returned 88% in just one year and 68.1% over the next two years. The post-2011 and 2012 recoveries were also strong, delivering gains of 73.2% and 71%, respectively, over the two years.

Even after the September 2022 dip, when Alphabet fell into a bear market with a P/E ratio of nearly 19, the stock rallied 32% over the next 12 months and 51.2% within 24 months.

Across the four historical periods when Alphabet traded below 20 times earnings, the average 2-year return was a remarkable 65.9%, while the 1-year gain averaged 38.5%—more than double its 20-year annualized return of 17.3%.

In contrast, short-term performance was mixed. One-month returns after low P/E events averaged -1.6%, while three-month gains averaged just 2.7%. The real upside consistently showed up after one year or more.

A look at Alphabet's past performance shows a clear pattern: the bigger gains came with patience.

Is Alphabet Stock Set To Rally Again?

On March 28, 2025, Alphabet was trading at $154.33 with a P/E of around 17.1. Since then, the stock has posted a modest 10.2% gain over the past three months.

While past performance doesn’t guarantee future results, the data suggests that patient investors buying at these discounted multiples have often been rewarded.

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