1. Microsoft (MSFT)
Down around 21% in the past 6 months, Microsoft’s 1.3 PEG isn’t as attractive as other AI stocks – but it’s their long list of reliable and diversified revenue sources that gives it a better risk profile than a lot of pure-play AI stocks out there.
MSFT stock has a great valuation at a 23 PE given its 5 year historical average is closer to 33 (43% higher that where it is today). This means Microsoft stock is trading at a discount when compared to it’s last 5 years on a valuation basis. They also have a surprisingly impressive dividend history even if it only amounts to around a 1% average yield.
Microsoft has also beat all 4 of their last earnings calls and analysts have rated Microsoft a Strong Buy with an average one year forecast of +36%. We have put them as low risk, medium reward and have rated it a Strong Buy with a +17% one year forecast.
2. Advanced Micro Devices (AMD)
With a 76 earnings multiple and 149% forecasted EPS growth over the next year, AMD currently sports a PEG ratio of just 0.5. Analysts are calling for their EPS to increase to $6.65 by April 2027 which would send this stock soaring if they can continue to hold up that valuation by beating earnings calls like they did last quarter.
We estimate that AMD could hit $400 as soon as November 2026 assuming the valuation holds and AMD is able to meet their earnings expectations through to the end of the year, and we have a fair amount of confidence this is likely to happen.
The average analyst rating is a Strong Buy with a -20% one year forecast and we have it rated a Buy with a +30% one year upside.
3. Alphabet (GOOG)
Up 21% year to date, GOOG stock has been doing incredibly well and analysts are in agreement that it is going to continue to do well in this next year. Analysts have rated Alphabet a Strong Buy and are still maintaining a +6% one year forecast. Google Search currently commands a 90% market share and Google as a whole has a diverse list of revenue streams. Alphabet is also well positioned to take advantage of any upcoming AI tech advancements.
GOOG currently has a slightly high PE relative to its competitors at around 28, but it’s strong EPS growth forecasts of around 19% year-over-year certainly mitigate a lot of this valuation risk. Alphabet has beat its last 4 earnings calls and we have put GOOG as a low risk, medium reward at this time. We currently have GOOG rated a Strong Buy with an +11% one year growth forecast.
Topics: MSFT stock review, AMD stock analysis, GOOG stock price prediction
