Stock split or not: How to gauge the resilient Google (Alphabet) stock for buying?
Google has come a long way today by disrupting the tech market worldwide and bagging the crown as the third-largest company in the US.
The smoothest search engine, dependable maps, binge-worthy YouTube, and high-performance data center - Google (GOOGL) has shown innovation at its best.
Over the years, it has expanded its original offerings, but little do we know about its different arms and businesses. A general investor thinks of Google as just a user-friendly search engine or map. But in reality, it is so much more and ever-expanding! Let’s discover.
Brief history
Google was originally founded in 1988 as a search engine company under Google Inc, now known as Alphabet Inc. It went public in 2004 when it held its much anticipated IPO priced at $85 per share for a valuation of $23 billion. It became a subsidiary company under Alphabet in 2015.
As the company restructured it split its stock into two share classes - GOOGL (class A) and GOOG (Class C). They are both available on the NASDAQ stock exchange with a slight price difference.
Today it has a nearly $2 trillion market cap. Its current share price is over $2600 per share. Yes, you read that right! Even though it looks expensive, we still recommend buying it for the reasons listed below.
Brand value
Google remains the most popular search engine and owns YouTube, with billions of users all across the globe. Over the years, it has developed an economic moat allowing it to enjoy a competitive advantage that protects its brand image and profitability.
Google’s dominance in these two segments allows it to earn heavily from advertisers on these platforms. Its cloud computing segment is also picking up against Microsoft Azure and Amazon Web Services, giving investors another reason to invest.
Cash-rich
Google has a slight cash problem! The problem is that the tech giant has way too much cash. It hoards cash and investments of $169 billion, meaning it totals 6.3% of the holdings of all S&P 500 companies.
Present earnings
In its fourth quarterly report, Alphabet committed $75 billion in revenue for the quarter and $257 billion for the entire financial year. The holding company, Alphabet, hit $2 trillion last year.
They have witnessed a 41% growth in revenue, and the operating income growth has reached an unbelievable 91%.
E-commerce companies like Amazon and Shopify have also deepened ties with Google. With newer ties, Google stocks have become more attractive for your portfolios than ever!
The stock split is a boon for investors.
The company announced a 20 for 1 stock split, which will reap benefits soon. Historically we have observed that Tesla and Apple did a great job in the stock market after they announced their stock split.
New products and services
As the scope for innovation widens for Google, it is natural that the company is coming up with tech-disruptive offerings in the market. Google has announced the launch of a self-driving car project named Waymo. It is predicted to revolutionalize mobility.
Its P/E ratio is not enough to assess.
While the P/E ratio is a valuable metric to evaluate a stock, it is alone not enough for a giant like Alphabet. It is currently trading at a P/E ratio of 22, which is not bad for a company with 32% revenue growth. It might look expensive, but it is not overvalued with the promising growth, revenues, and expanding business segments.
Conclusion
Google stocks are and will remain an attractive buy for investors. The diverse range of products and services makes it one unique company! With new changes in its setup, it is not going to lose its position as one of the largest tech companies in the world.
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