A company usually undergoes a stock split when the price of its shares has gotten very high. It’s the latest stock split in Silicon Valley, following Apple and Tesla, which https://www.dowjonesanalysis.com/ in recent years both split their stocks as their valuations skyrocketed. Here’s what you need to know about stock splits, and how Alphabet’s move will impact investors.
I have the view that AAPL earned its premium multiple primarily due to its aggressive share repurchase program. GOOGL has begun a similar endeavor and still has plenty of net cash on its balance sheet to fund aggression in the future. AAPL is trading at around a 2x price to earnings growth ratio (‘PEG ratio’). On a like-for-like basis, GOOGL could trade up 100% to simply match AAPL on a PEG ratio basis.
For all that current and potential growth, Alphabet stock is trading at a significant discount to its historical range. The stock is selling for just 20 times earnings, its cheapest valuation since 2012. While businesses in this segment are losing money now, they could become significant revenue drivers in years to come.
Alphabet stock surged on the news, with shares climbing nearly 8% — but the rally was short-lived. As has been the case with many technology stocks, Alphabet shares are underwater over the past year, recently notching a new 52-week low. Retail investors can, of course, buy fractions of Alphabet shares on trading platforms. Other margin pressures included currency fluctuations, international growth, lower-priced YouTube clicks, and the strength of the mobile platform.
What exactly is a stock split?
Stock splits are not a new thing, and they’re certainly not new to Alphabet. The company has conducted multiple stock splits already, https://www.topforexnews.org/ back in 2014 and more recently in 2019. For Alphabet, these splits present investors with more accessible GOOG and GOOGL stocks.
Over the long term, however, it’s the company’s business performance and financial results that will drive the stock higher — or lower. That means that shareholders won’t have to take any additional action in order to take part in the stock split. As with most such events, the brokerage will handle the details and the additional shares will simply show up in their investing accounts. It’s important to note that the additional shares may not show up immediately after the market closes on July 15. The timetable varies slightly from brokerage to brokerage and can take several days before the new shares make an appearance.
How many times has Google stock split?
The current stock price won’t have any impact on the stock split, however. Alphabet shareholders approved the measure this week at the annual shareholder meeting, which paves the way for the next steps. Shareholders on record as of July 1, 2022 will receive 19 additional shares of Alphabet stock for every one share they own after the market close on July 15. In March 2014, the company enacted a 2-for-1 stock split, although rather than doubling of shares, it issued new Class C shares devoid of voting rights.
- It’s the latest stock split in Silicon Valley, following Apple and Tesla, which in recent years both split their stocks as their valuations skyrocketed.
- On an adjusted basis (my adjustment for unrealized gains), GOOGL earned $26.77 in EPS versus $19.24 in the prior quarter.
- But, in 2012, company founders Larry Page and Sergey Brin noticed the price tag of GOOGL could be creating a barrier to entry for new investors.
- GOOGL isn’t trading as cheaply as many tech peers, but its strong margins and clear outlook make it a compelling investment opportunity, nonetheless.
The duo control 83% of the company’s Class B shares, which do not trade on open markets. They described the introduction of the third class as “effectively a stock split” in a 2012 letter and said it was something many shareholders had been clamoring for. Note that analyst predictions about the future of Alphabet shares may be wrong and should https://www.forexbox.info/ not be used as a substitute to your own research. Make sure to conduct your own due diligence, looking at the latest news, technical and fundamental analysis, and a wide range of commentary. Alphabet’s diversification strategy involves significant investment in various sectors, increasing competition, legal hassles, and regulatory scrutiny.
GOOG vs. GOOGL: Everything You Need to Know About the Google Stock Split
Alphabet intends to split the Class A, Class B and Class C shares of the stock, according to the earnings statement. Each shareholder at the close of business on July 1 will receive, on July 15, 19 additional shares for each share of the same class of stock they own. Alphabet generated revenue of $75.3 billion, an increase of 32% year over year. Perhaps even more impressive was that revenue for the full year jumped 41%. At the same time, Alphabet’s quarterly operating margin ticked higher to 29%, up from 28% in the year-ago quarter. This resulted in net income of $20.6 billion and earnings per share (EPS) of $30.69, which surged 38%.
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And of course, the values of these stocks have been pushed sky-high as a result. Stock splits are a great way to make stocks more affordable for investors, and that’s exactly what is driving Alphabet to conduct its splits. “This could be the move that gets Google into the Dow Jones index,” Wedbush Securities analyst Dan Ives tells CNBC Make It. “This would be a positive impact to the stock as being part of this flagship index would cause index buying from investors.” Analysts have also speculated that the move could get Alphabet’s stock into the Dow Jones Industrial Average, which it is not currently a part of due to its high price.
The company also anticipates incurring exit costs of approximately $0.5bn in Q due to global office space optimization. On an adjusted basis (my adjustment for unrealized gains), GOOGL earned $26.77 in EPS versus $19.24 in the prior quarter.
With a commanding position in online advertising, GOOGL remains a compelling long-term investment. We can see below that consensus estimates call for double-digit topline growth for many years to come. Gaining entry to the Dow could further boost the stock, as index funds that track the average would be forced to buy. The fundamentals and market capitalization of the company would be unchanged. The time to buy is when there is blood on the streets, when no one else wants to buy. In January 2023, Alphabet announced plans to cut approximately 12,000 roles from its workforce, with expected severance and related charges ranging from $1.9bn to $2.3bn.
Google’s parent company Alphabet is planning to split its stock 20-for-1, it revealed in its blockbuster earnings report Tuesday. Common stock split ratios are 2-for-1 or 3-for-1, where a shareholder receives an additional one or two shares for every stock held. The unit price of the stock will fall by a division of two or three, accordingly, after the split takes place. While investors cheered the stock split news earlier in the year, concerns about macroeconomic headwinds have pushed GOOGL and GOOG shares to a two-year low in early November 2022.