Reasons to buy Alphabet stock before a stock split

2022-02-06T14:47:10
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Reasons to buy Alphabet stock before a stock split

 

Reasons to buy Alphabet stock before a stock split: The big cash-return tech giant has a lot of tricks up its sleeve.

Quarter after quarter, Alphabet has proven to be one of the best companies on earth.

The market capitalization of Google, YouTube, and Google Cloud is nearly $2 trillion, making it the third largest company in the United States.

 

Evest follows Alphabet stock development in the following report

Topics:

Gain Report for the Fourth Quarter

Cash stocks and their generation

The sun is starting to shine through the Google Cloud

 Google and YouTube are among the leaders of the categories

Gain Report for the Fourth Quarter

During its fourth-quarter earnings report on February 1, Alphabet reported a staggering $75 billion in earnings for the quarter and $257 billion for the full year.

These mind-boggling numbers get even crazier when the annual growth rates of 32% quarterly and 41% annually are factored in.

However, these impressive results were overshadowed by management’s announcement of a 20-to-1 stock split.

The roughly $3,000 stock will trade for about $150 after the July 4th holiday in 2022.

While the stock split doesn’t affect the business, the stock often does well after the split is announced — just look at Tesla’s performance and Apple during August 2020 after each company announced the split. 

Despite this potential trigger, there are three strong reasons that encourage investors to buy the company’s stock now

Cash stocks and their generation

As of December 31, 2021, Alphabet had $139.6 billion in cash and marketable securities on its balance sheet and only $14.9 billion in debt.

Having a war chest sitting allows Alphabet to buy whatever you want.

During the Q4 conference call, CEO Sundar Pichai mentioned research into a blockchain solution for Web3 (which could feed the metaverse).

Alphabet may go shopping for a company to fulfill this desire – and it can make it happen with its resources.

If Alphabet dumps even half of its money on an acquisition, investors shouldn’t be afraid; Alphabet will generate more next year.

Throughout 2021, Alphabet turned $67 billion of its $257 billion in revenue into free cash flow.

If it doesn’t spend its money on acquisitions, management may buy back more shares – it bought back $50 billion throughout 2021.

No matter what management decides, Alphabet’s stock of money and generation makes it a great investment.

 

The sun is starting to shine through the Google Cloud

In the battle for cloud computing supremacy, Google has yet to beat customers Amazon Web Services and Microsoft Azure.

However, Google’s cloud is far from a lackluster chip.

During the fourth quarter, its quarterly revenue grew 45% year over year to $5.5 billion and increased by 47% through 2021.

While Google Cloud continues to lose $890 million, a lot can be attributed to costs associated with expanding its server infrastructure – Which indicates that Alphabet has not given up its cloud offering. 

While Google Cloud may never outperform Azure or AWS, the deals Alphabet saw during the fourth quarter of the year will give investors hope.

Management cited a 70% increase in backlog to $51 billion, most of which thanks  to Google Cloud” during the fourth quarter conference call.

Additionally, it has seen 80% growth in deal volume and 65% increase in deals in excess of $1 billion.

Google Cloud is gaining traction, and investors should consider owning Alphabet stock because of it.

 

 

 Google and YouTube are among the leaders of the categories

Alphabet has two companies with insane market share in their respective categories.

In all, Alphabet’s advertising segment generated $61.2 billion and grew 33% with the addition of its Google Network division.

These numbers are teasing 2020 pent-up COVID revenues, and the growth numbers won’t be impressive throughout 2022.

But the ads aren’t going away anytime soon.

alongside aspect with the “Google Other” section, the running section operated with an running margin of 37% ,
and remained the simplest worthwhile section withinside the alphabet. 

 Advertisements keep the lights on at Alphabet’s headquarters, and with two distinct ad platforms in place,
investors should be confident in the future of these two sectors. 

Alphabet is trading at an attractive 26x earnings – which isn’t too bad for a company with 32% revenue growth.

The stock is nowhere near a peak valuation, although it is close to reaching all-time highs.

This should ease concerns about buying stocks with inflated valuations,
as the company’s earnings are 26 times not expensive at all.

Alphabet is a solid buy no matter how investors view the stock.

Those who hold the stock for three to five years will reap the benefits of a stock split,
potential stock buybacks, a buyout or two, and a lot of cash generated.

The alphabet is a no-brainer. Although it is near an all-time high, investors of all backgrounds can find a place for Alphabet in their portfolios.

 

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