The parent firm of Google, Alphabet, is a market leader in digital platforms and advertising. In addition to Chrome, Android, Google Search, Google Maps, Gmail, and YouTube, it also owns a vast array of other businesses. The 230+ firms that makeup Alphabet are broken down into three business categories: Google Services, Google Cloud, and Other Bets, which is a collection of earlier-stage startups that aren’t yet producing enough money on their own. Alphabet (GOOGL) recently announced a 20-for-1 stock split.
A 20-for-1 stock split was announced by Alphabet (GOOGL). A new stock buyback scheme that the business recently unveiled includes plans to buy up to an extra $70 billion worth of its own shares. The stock split will pave the way for the company to enter the Dow Jones Industrial Average. As previously indicated, stock splits frequently make formerly “expensive” shares more appealing to retail investors, and given the popularity of the brand and the stock’s reputation, this is probably the case for GOOGLE. The action was taken a year and a half after Apple last divided its stock, giving shareholders three shares for every share they owned. As investors choose profitable growth, only a select few technology companies have seen their market capitalizations rise into the trillions, including Alphabet and Apple.
Do investors need to worry?
You can still think about purchasing the stocks even if you haven’t bought the shares. In the upcoming years, there are still triggers that could raise the price of Alphabet’s stock. Google continues to hold a 92% global market share, so there is no disputing its supremacy in the search industry. Additionally, it holds a 28% share of the global market for digital advertising.
Even after experiencing a big correction during the most recent bear market, Alphabet has still awarded investors with a gain of 4170% since its IPO in 2004. According to the majority of experts, the Alphabet has long development potential. Instead of the futility of a stock split, investors should concentrate on the company’s superior execution, market leadership, and long-term potential.
Should you buy before or after the stock split?
The likelihood that investors would bid up the share price ahead of the split is one of the key justifications for purchasing shares before it happens. According to past trends, the stock prices often increase in the days and weeks preceding a split. The price of Alphabet has increased by more than 8% during the past five days. Stock splits frequently spark investor interest, which elevates the share price.
Conclusion
Alphabet’s revenue from the advertising division of Google accounted for 80% of its total in the first quarter (including YouTube). Although it experienced brief slowdowns during both the Great Recession and the COVID-19 pandemic, its advertising business has always recovered from such setbacks.
Therefore, this is still an excellent time to invest in Google’s market-leading digital advertising company if you anticipate it to weather the current macroeconomic headwinds.
