You’ve likely heard of Google. Their parent company, Alphabet, just happens to be the third-largest public company in the United States. The Google search engine also owns about 86% of the worldwide desktop market share, according to Statista.
But why should you care? Well, GOOGL just announced that they will be spilling their stock 20-for-1 in mid-July. This action will make individual shares less expensive and more accessible by reducing Class A shares to around $138 per share (based on Tuesday’s close price of $2,753).
It’s rumored that the stock split could also “set the stage for inclusion into the [Dow Jones Industrial Average],” – analysts at UBS. APPL was added to the Dow after its stock split back in 2015.
What A Stock Split Is
In our Common Trading Terms post, I defined a stock split as when a company increases the number of its shares to boost the stock’s liquidity by splitting a single share into multiple. This means that the shareholder will now have multiple shares for every single share they currently own.
So, the burning question is, should you invest in GOOGL?
The short answer is yes, but I’ll break down why anyways.
GOOGL Company Profile
Date Founded: 1998
Headquarters: Mountain View, California
Sector: Communication Services
Industry: Internet Content & Information
Full-Time Employees: 150,028
Mission Statement: “To organize the world’s information and make it universally accessible and useful.”
Why GOOGL Is A Great Portfolio Add
After the stock split, GOOGL will be a relatively affordable addition to your investment portfolio, and there are few more stable companies in a prime position to grow than Alphabet.
For one, “Alphabet’s sales jumped 32% to $75.3 billion in the fourth quarter, for a third straight quarterly sales record and topping the average estimate of $72 billion among financial analysts tracked by Refinitiv…
For the 2021 full year, Alphabet’s sales rose 41% to a record $258 billion. Sales had grown just 13% in 2020, the slowest rate in over a decade, after advertisers slashed spending in the first few weeks of the pandemic.
Across both 2021 and 2020, Google’s advertising business, including YouTube, accounted for 81% of Alphabet’s revenues.” – Reuters.com
Alphabet’s Google.com generates an insane amount of online ad revenue, and that revenue is estimated to continue to grow. COVID only accelerated the world’s need for online advertising. In this humble marketer’s opinion, Google Ads is the best place to invest your online advertising dollars.
In addition to ad revenue, Alphabet has several secondary businesses positioned well to take advantage of the continued growth of tech. Google Cloud serves Shopify, one of the largest website companies. Google Pixel smartphones compete in the phone market. Google Play is Android’s choice for a mobile app store. Alphabet is even in the self-driving space. Alphabet has the cash flow to get into most industries if it sees a reason to.
All this to say that Alphabet is well-positioned to grow and continue its domination of the tech space. Why wouldn’t you want a company like that in your portfolio?
Key Takeaways
In our opinion, GOOGL stock will continue to increase in value over the years. If it enters the Dow, it will likely see an increase in value. If the company continues to grow and diversify into new industries, its share value will increase. If online ad revenue continues to grow, GOOGL’s share value will increase. There are many ways for this stock to grow in value.
If you can’t afford its current share price, getting in after the stock split is a great idea. If you can afford its current share price, you may benefit from buying in before the stock split so you can profit from the bump many stocks get immediately after they split. After all, each share you buy today will become 20 shares after the split.
