3 Reasons This Beaten-Down "Magnificent Seven" Stock Is a Bargain Buy Right Now

It's fair to say the broad market and "Magnificent Seven" stocks have seen better days. The Nasdaq Composite recently entered correction territory, and the index is down 8.1% year to date.

Among the Magnificent Seven stocks -- Apple, Nvidia, Microsoft, Amazon, Meta, Tesla, and Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) -- only Meta is still in the green so far this year.

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Data by YCharts.

However, it's not time to sound the alarm just yet. If anything, now is the time to think about bargain shopping.

One beaten-down Magnificent Seven stock that's looking increasingly appealing is Alphabet. It's down about 20% from February's all-time high, but its business has a ton of momentum behind it. If you're hunting for bargains in this sell-off, here are three reasons to consider Alphabet.

1. Alphabet continues to be a cash cow

Alphabet has an impressive portfolio of companies: Google, YouTube, Waymo, DeepMind, and Calico, among others.

While some of these businesses fall into Alphabet's "Other Bets" segment because they're more experimental and focused on long-term innovation, companies like Google and YouTube have turned Alphabet into a premier cash cow.

In 2024, Alphabet generated over $350 billion in revenue, up 14% and almost $100 billion more than what it reported three years ago. Only 10 other public companies have generated more revenue in their past four quarters.

Alphabet's impressive revenue and operating income (over $112 billion in 2024) explain how the company has managed to accumulate $96 billion in cash, cash equivalents, and short-term marketable securities.

Having a large cash reserve gives Alphabet a lot of flexibility to make the appropriate investments for growth, putting it in a position to weather most economic storms that come its way. That's key to long-term stability.

2. Google Cloud will be Alphabet's next major money-maker

Google Cloud is Alphabet's fastest-growing segment. In the fourth quarter, its revenue increased 30% year over year to $12 billion, or 12.4% of total revenue. In the same quarter two years ago, its share of the top line was 9.6%. And five years ago, it was just 5.7%.

It has a ways to go to catch up to Amazon Web Services (AWS) and Microsoft Azure in terms of market share, but it's very much trending in the right direction. As of Q4, AWS and Azure had a 30% and 21% market share, respectively, while Google Cloud sat at 12%.

With the cloud computing market projected to have a compound annual growth rate (CAGR) of more than 16% through 2032, Google Cloud doesn't need to overtake AWS or Azure to be a lucrative business. Its existing trajectory means it will claim more market share for Alphabet while significantly increasing revenue and profitability.

The profitability part is especially true for this platform. Cloud services have a lot of fixed costs (data centers, server infrastructure, research and development, etc.), so economies of scale play a big role in boosting margins. Google Cloud is already seeing a major improvement on this front as its Q4 operating margin increased from 9.4% to 17.5% on a year-over-year basis. Two years ago, the segment was still reporting a loss.

3. It's becoming too hard to ignore Alphabet's valuation

Valuation isn't everything when investing in a great long-term business, but an attractive entry point certainly helps. Alphabet is trading at less than 21 times trailing-12-month earnings, far below its average for the past five and 10 years.

It's also noticeably cheaper than any of the other Magnificent Seven stocks as you can see below.

Data by YCharts.

Alphabet faces some risks, such as a drop in short-term ad spending if macroeconomic conditions further deteriorate and regulatory hurdles.

However, the business is positioned to flourish in the long term. If the current volatility has you worried, consider dollar-cost averaging as a way to gradually build up your stake.

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*Stock Advisor returns as of March 14, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Stefon Walters has positions in Apple and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.