Why it’s undervalued: Alphabet (Google’s parent) trades at a P/E ratio around 20–22, which is below its own 5- and 10-year historical averages (24–28) and well under peer multiples (Apple and Microsoft trade ~30+ P/E)​. In fact, its forward P/E near 21 is lower than the S&P 500 average and significantly below other tech giants​. This muted multiple comes despite double-digit growth in Google’s core advertising and cloud segments. Alphabet also boasts a strong balance sheet (net cash) and massive free cash flows – its price-to-cash-flow metrics rank favorably against big-tech peers. Overall, the market appears to be undervaluing Alphabet’s stability and growth, possibly due to overblown fears of digital ad slowdown or competition in AI search. DCF valuations suggest upside: for example, Alphabet’s stock trades at only ~0.87 of Morningstar’s fair value estimate​, implying about 15% undervaluation. Key risks: Regulatory pressures (antitrust cases in search and app stores) could weigh on sentiment​. Competition in AI (e.g. Microsoft’s push into AI-powered search and cloud) poses a threat if it erodes Google’s dominance. Heavy investments in experimental projects (like Waymo or other “Other Bets”) or AI could drag margins if not monetized. Potential catalysts: Continued growth in Google Cloud (which saw revenue +35% YoY and a big jump in operating profit)​ will highlight Alphabet’s expanding business beyond advertising. Improvement in ad spending or successful monetization of YouTube Shorts/Reels could boost earnings. Any positive resolution of regulatory cases, or demonstration that Google’s search business remains resilient against AI competition, may prompt a re-rating. Alphabet’s ongoing share buybacks (over $70B authorized) also provide support to EPS and the stock.