The stock market just closed out a brutal September.
The S&P 500 lost nearly -4% last month, the Dow dropped -3%, and the tech-heavy Nasdaq fell -6%.
But the market may be in the midst of a turnaround. Since Monday, the S&P 500 is up 0.9%, the Dow has added 0.8%, and the Nasdaq has gained nearly 1.9% as of Thursday’s close.
If the trend holds and the market closes up on Friday, this will be the first positive week in five weeks.
Still, the S&P 500 is -5.6% below its September 2 all-time high, and several stocks in the index have seen significant declines since that record high.
Citigroup (NYSE: C) has dropped -16% since the September high, Google-parent Alphabet (NASDAQ: GOOGL, GOOG) is down -13%, Halliburton (NYSE: HAL) has crashed -45%, Kraft Heinz (NASDAQ: KHC) has fallen -11%, and Wynn Resorts (NASDAQ: WYNN) is down -19%.
But among these, there’s one stock in the group that traders say looks like a good opportunity now.
New Street Advisors founder Delano Saporu said he’s buying the pullback in Alphabet.
“We’re looking at Alphabet so you can talk about the financials, they’re obviously strong, but a couple of other tailwinds that I see are the ad spend and ad revenue,” Saporu said this week. “Companies are starting to loosen the belt when it does to ad spend and ad revenue, which is the majority of their revenues.”
In is second quarter, Alphabet reported its first ever year-over-year revenue decline of 2%, sending the stock lower. But Alphabet CFO Ruth Porat said on the company’s earnings call that advertisers have already started to increase spending.
“We also talk about the uphill battle that they have in cloud, but I think any increase that you see in that will be great for shareholders,” Saporu said. “So they’re battling Microsoft (NASDAQ: MSFT), they’re battling Amazon (NASDAQ: AMZN) when it comes to the cloud revenue, but I think they can make headway in that space.”
Morgan Stanley analyst Brian Nowak said in a recent note that he sees “continued strong Google Cloud reported growth, giving investors more confidence in its revenue and earnings potential” into 2022 and beyond, “which, given the $1 trillion-plus public cloud addressable market, should drive multiple expansion.”
Nowak reiterated his Overweight rating on the search giant’s shares, boosting his price target from $1,760 to $1,800 – nearly 21% higher than the price as of this writing.
The Morgan Stanley analyst also argues that Google will be the first place consumers will turn when they are researching purchases and comparing prices on virtually anything, and that the company’s ad revenue should benefit form a holiday shopping season where many shoppers will likely shop online.
“Even when consumers know the exact products they want to purchase,” Nowak wrote, “nearly one out of five will still visit Google first.
Laffer Tengler Investments’ Nancy Tengler is also bullish on Alphabet, as well as the broader tech sector.
“We’ve been pretty big advocates of technology,” Tengler said. “I don’t think that coming out of the other side of the pandemic that individuals or companies are going to use technology less. So we still like the group. We’re just looking for companies that are growth at a reasonable price, not growth at any price.”
For Tengler, Alphabet’s valuation is attractive. The tech giant trades at 27 times forward earnings, which is higher than the nearly 22 times multiple of the broader S&P 500. The company’s earnings, however, are expected to rise by 15% from fiscal 2019 to fiscal 2021, while the S&P 500’s earnings are expected to rise just 2% in the same time frame.