Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) makes about 80% of its revenue from advertising. But the company is facing forces that could disrupt its business model and hurt GOOG stock. Ongoing legislation in the U.S. and E.U. regulatory actions could prevent Google from benefiting from its “gatekeeper” status with online ads.

For example, if you do a search for a location, Google Maps may not be the prioritized option that you use, as author Bohdan Kucheriavyi points out on Seeking Alpha. He says that Google’s model could change forever and that it “[risks] losing a significant portion of its income.”

He paints a pretty drastic scenario where Google could be hobbled by these regulations. Nevertheless, he also points out that Alphabet is fighting the implementation of these laws and regulations. They may not even come into effect in the E.U., where most of its risk now seems to be.

Google’s Plight Is Tied to the Economy

The problem with Kucheriavyi’s analysis is the fact that he does not model out the potential effects. One major factor is that online advertising continues to grow and takes up more market share from traditional sources. That feeds into Google’s revenue model, regulations or not.

A second factor not fully analyzed is the huge elasticity effect of Google Search. People trust Google Search and Google products.

So, for example, what will it matter if the brand name effect of Google Maps outperforms other location map services or even other search services? It’s hard to believe that with the power of Google’s brand effect and how inelastic the demand is, people will not move away.

Lastly, analysts still are not worried. Let’s look at what they project. Seeking Alpha shows that 41 analysts forecast revenue up 15% this year to $298.18 billion. They also forecast 15% gains next year for revenue of $343.33 billion. That includes all their fears and adjustments for a potential recession.

Moreover, earnings per share (EPS) is forecast to rise 18.75% to $133 per share. That puts the stock on a forward price-to-earnings (P/E) multiple of just 16.8x for next year. This is well below its historical average of 26.3x for its forward P/E over the last five years, according to Morningstar.com.

The reason could lie in the fact that revenues in the online ad arena are in a long-term uptrend. Even if Alphabet’s Google unit garners a lower market share in the future, the company’s revenue and earnings could still be forecast to rise.

Where This Leaves Investors in GOOG Stock

Alphabet does not pay a dividend, but the company is planning on doing a stock split on Jul. 15. That may provide a temporary boost for GOOG stock as the $2,239.84 price as of this writing falls by 20 times to $111.99. Traders may push the stock up closer to that point in time assuming the lower price will encourage more people to buy the stock.

More importantly, Alphabet is producing huge amounts of free cash flow (FCF). Last quarter, its FCF was $15.32 billion, as can be seen on page 7 of its quarterly earnings release. This leaves plenty of room for the company to buy back its shares.

For example, last quarter alone it repurchased $13.3 billion of its shares. That works out to $53.2 billion annually and could likely be much higher if buybacks are seen as a percent of revenue that is growing.

In fact, on Apr. 22, the company raised its buyback program to $70 billion. That equates to 4.93% of its $1.42 trillion market capitalization. This implies that there is an implied 5% gain in the stock price even before any EPS gains, multiple expansion, or a boost from the upcoming stock split.

Lastly, if we use the Morningstar forward P/E of 26.3 times multiple, GOOG stock could rise 56.5% from its present 16.8x forward P/E. Even at 20x, the stock would rise 19%. That shows that Alphabet is simply too cheap here, despite fears about a changing regulatory environment for its Google unit.

On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.