The Magnificent Seven stocks are accustomed to being treated like royalty as they continue to drive a record performance in the stock market. However, one of the Magnificent Seven stocks might not be feeling so magnificent lately.

Alphabet (Nasdaq: GOOGL) stock was the recipient of a cautious analyst report in which its price target was slashed. Wall Street firm Wells Fargo believes that at $174 per share, Alphabet stock price is too high. Analyst Ken Gawrelski cautioned that GOOGL stock should be trading closer to $141, suggesting shares could tumble by almost 20%.

So far this year, Alphabet stock has advanced 26%, as the company’s artificial intelligence (AI) investments have paid off, including better Google search capabilities and the unveiling of its rebranded chatbot Gemini. But whether or not that performance can continue is the million-dollar question.

The company’s leading market position in search has been challenged by OpenAI’s ChatGPT, which is backed by software powerhouse Microsoft (Nasdaq: MSFT). Now that Apple (Nasdaq: AAPL) has announced a partnership with OpenAI, the competitive landscape is only getting fiercer. And OpenAI is reportedly building its own search product to go head to head with Google.

Meanwhile, Alphabet has been embroiled in several legal battles of late, the costs of which caused Wells Fargo analysts to reassess their outlook on GOOGL stock.

Alphabet: Implied Downside of 19%

Based on Alphabet’s latest market price, Wells Fargo believes the stock has an implied downside of 19%. The Wall Street firm’s cautious outlook is in response to expenses the company incurred this year from legal complaints. Among them, Google’s parent company agreed to pay investors a hefty $350 million sum due to a data privacy breach involving Google+, a social platform that the company has since closed down. If approved, that payout will represent the biggest data-privacy-related settlement ever since Institutional Shareholder Services has been keeping records.

Adding insult to injury, Google was also fined the equivalent of approximately $270 million for breaking EU intellectual property regulations involving AI. The media publishers and agencies by which Google’s AI chatbot models were trained were not made aware of their involvement. Google pleaded no contest and said it would pay the settlement so it could move forward. Alphabet also reached a privacy-related settlement with Incognito, but there was no payout involved.

At $144, Wells Fargo’s original price target on Alphabet stock wasn’t too ambitious to begin with. But the analyst firm decided to make a point when it lowered it by 2%, to $141, with an “equal weight” rating on the stock, which is equivalent to a “neutral” rating.

Should You Sell Alphabet Stock in June?

Google is facing heightened competition in its core area of search due to AI. Both Microsoft and Apple have relationships with ChatGPT maker OpenAI, while Google strives to reinvent itself as a true AI play. Google has come out swinging with a rebranded AI chatpbot (Gemini) and more robust search capabilities. While it might not be smooth sailing, Google is likely to continue jockeying for market share with the other players.

Once the impact from these legal and regulatory settlements are behind, Alphabet’s operations will no longer be impacted. Of the three-dozen-plus Wall Street analysts who cover Alphabet stock, most of them have assigned a “buy” rating, with an average price target of approximately $197. Even with its challenges, Alphabet’s stock hasn’t been held back this year, suggesting investors aren’t too worried about its setbacks.

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