Is it worth buying the only “Magnificent Seven” stock that is cheaper than the S&P 500 by this key metric?

The Magnificent Seven Companies – Microsoft, Apple, Nvidia, Alphabet (GOOGLE 0.99%) (GOOG 1.05%), Amazon, Meta Platforms (FINISH 0.60%)AND Tesla — are known for their growth prospects and rewarding long-term shareholders with huge profits, but not necessarily for being great value stocks.

However, earnings growth and the recent sell-off in Alphabet shares have pushed the company’s forward price-to-earnings ratio below S&P500. The forward P/E ratio is based on forecasts for the next 12 months, not on performance over the past 12 months.

Is it worth buying the cheapest Magnificent Seven stock now? Here’s what we think.

The alphabet has many advantages

At first glance, Alphabet seems too cheap to ignore.

GOOGL futures price to earnings data by YCharts.

Aside from its low valuation, the company is nothing short of a cash cow. It has diversified businesses in Google Search, Google Cloud, Android, and YouTube. The conglomerate also has a number of long-term growth projects — including Waymo, Google Fiber, and DeepMind, one of Alphabet’s AI research and development subsidiaries.

The company ended the last quarter with a staggering $110.9 billion in cash, cash equivalents, and marketable securities, while it had just $13.3 billion in long-term debt.

Earlier this year, Alphabet initiated its first quarterly dividend payment. In addition to a massive share buyback program, Alphabet is returning a lot of money to shareholders.

Despite Alphabet’s strengths, there are several reasons to be wary of investing in it.

Alphabet faces many challenges

Alphabet has been in the spotlight for a recent antitrust ruling that could change its business practices. But big tech companies are no strangers to antitrust threats.

Amazon’s retail and cloud infrastructure arm, Amazon Web Services (AWS), has long been under antitrust scrutiny. Earlier this year, Apple experienced a sell-off in response to a U.S. Justice Department civil lawsuit alleging it was monopolizing smartphone markets. While the ruling alone won’t be enough to offset all of Alphabet’s advantages, it’s certainly a wake-up call.

While investors shouldn’t ignore the antitrust ruling, a more serious long-term threat is the health of some of Alphabet’s core businesses. Alphabet has been a pioneer in artificial intelligence (AI) for years, as AI is a key driver of Google’s search algorithm. Google’s virtual monopoly on search could be challenged by innovative tools like OpenAI’s SearchGPT, which launched in July.

Google Cloud ranks a distant third, behind AWS and Microsoft Azure, when it comes to cloud infrastructure market share.

When it comes to an integrated ecosystem of high-performance software and hardware, Android and Google Pixel are no match for iOS and Apple’s iPhone.

Competition from Meta Platforms is heating up. In the latest quarter, Alphabet generated $66.3 billion in revenue from Google Services and $23.5 billion in operating income. Google Services includes Google Search, YouTube ads, Google Network, and Google subscriptions, platforms, and devices. Meanwhile, the Meta Platforms family of apps, which includes Instagram, Facebook, and WhatsApp, generated $38.7 billion in sales and $19.3 billion in operating income—making it nearly as large as Google Services from an operating income perspective and with a much higher margin.

During the same quarter five years ago, Alphabet posted $38.9 billion in revenue and $9.2 billion in operating profit, while Meta Platforms posted $16.6 billion in revenue and $4.6 billion in operating profit.

The key takeaway is that the Meta family of apps is growing faster and has higher margins than Google Search and YouTube. If Meta continues to gain screen time and market share, advertisers could divert money from YouTube to Instagram.

Another factor is the growing popularity of mobile devices over desktop computers. Instagram is designed for mobile devices, while YouTube is more suited to desktop use.

Alphabet is not a buy worth buying

Alphabet’s results have been excellent and will likely continue to impress in the short term. However, there are serious question marks about the long-term trajectory of the business.

The antitrust challenges are a drop in the ocean compared to Alphabet’s slew of competition across its business units. Alphabet can make improvements to fend off the threat of SearchGPT and other AI-powered search engines. But it can’t easily create a product that directly competes with Instagram — leaving YouTube vulnerable to market share erosion over time.

Alphabet isn’t a big stock, so it’s not a bad buy right now. But I wouldn’t be surprised if the company entered a period of slowing growth until it started innovating meaningfully again.

Randi Zuckerberg, former chief market development officer and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Suzanne Frey, CEO of Alphabet, is a member of The Motley Fool’s board of directors. Daniel Foelber has no holdings in any of the stocks mentioned. The Motley Fool owns shares in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long $395 January 2026 call options on Microsoft and short $405 January 2026 call options on Microsoft. The Motley Fool has a disclosure policy.