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2022-02-06

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3 Reasons to Buy Alphabet Stock Before Its Stock Split

This cash-generating king has more than one trick up its sleeve.

3 Reasons to Buy Alphabet Stock Before Its Stock Split

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The Google search engine, YouTube, and Google Cloud parent company has a nearly $2 trillion market cap, making it the third-largest company in the U.S.</p><p>During its fourth-quarter earnings report issued on Feb. 1, Alphabet announced an astounding $75 billion in revenue for the quarter and $257 billion for the entire year. These mind-boggling numbers become even crazier when the 32% quarterly and 41% annual year-over-year growth rates are accounted for.</p><p>Still, these fantastic results were overshadowed by management&#39;s announcement to split the stock 20-for-one. The nearly $3000 stock will begin trading for around $150 after the Fourth of July holiday in 2022. While a stock split does not affect the business, stocks often do well after announcing a split -- just look at <b>Tesla</b>&#39;s and <b>Apple</b>&#39;s performances during August 2020 after each company announced a split.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/668d83a52f9c8d977f6770a0cb627e0d\" tg-width=\"720\" tg-height=\"449\" referrerpolicy=\"no-referrer\"/><span>TSLA data by YCharts. (Tesla announced its split on Aug. 11, and Apple during its earnings.)</span></p><p>Despite this potential catalyst, I believe there are three stronger reasons investors should consider buying shares now.</p><h2>1. Cash stockpiles and generation</h2><p>As of Dec. 31, 2021, Alphabet had a jaw-dropping $139.6 billion in cash and marketable securities on its balance sheet and a mere $14.9 billion in debt. Having a war chest sitting around enables Alphabet to purchase whatever it wants. During its Q4 conference call, CEO Sundar Pichai mentioned looking into a blockchain solution for Web3 (which could fuel the metaverse). Alphabet may go shopping for a company to fulfill this desire -- and can make it happen with its resources.</p><p>Should Alphabet blow even half its cash on an acquisition, investors shouldn&#39;t fear; Alphabet will just generate more next year. Throughout 2021, Alphabet converted $67 billion of its $257 billion in revenue into free cash flow. If it doesn&#39;t spend its money on acquisitions, management may repurchase more stock -- they repurchased $50 billion throughout 2021. Regardless of what management decides, Alphabet&#39;s cash hoard and generation make it a fantastic investment.</p><h2>2. The sun is starting to shine through Google&#39;s Cloud</h2><p>In the battle for cloud computing supremacy, Google has not overcome <b>Amazon</b> Web Services&#39; and <b>Microsoft</b> Azure&#39;s leads. However, Google Cloud is far from a lackluster segment. During Q4, its quarterly revenue grew 45% year over year to $5.5 billion and increased at a 47% clip throughout 2021. While Google Cloud still lost $890 million, much can be attributed to costs associated with expanding server infrastructure -- showing Alphabet hasn&#39;t given up on its cloud offering.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/50428679d24a6a4fb9171a7372b727c9\" tg-width=\"700\" tg-height=\"466\" referrerpolicy=\"no-referrer\"/><span>Image source: Getty Images.</span></p><p>Although Google Cloud may never overtake Azure or AWS, the deals Alphabet saw during Q4 should give investors hope. Management cited &#34;backlog increasing 70% to $51 billion most of which can be attributed to Google Cloud&#34; during its Q4 conference call. Additionally, it saw 80% growth in deal volume and a 65% increase in deals over $1 billion. Google Cloud is picking up steam, and investors should consider owning Alphabet&#39;s stock because of it.</p><h2>3. Google and YouTube are category leaders</h2><p>Alphabet owns two businesses with an insane market share in their respective categories.</p><table border=\"1\"><tbody><tr><th>Segment</th><th>Market Share</th></tr><tr><td>Google Search Engine</td><td>86%</td></tr><tr><td>YouTube</td><td>76%</td></tr></tbody></table><p>Data source: Statista and Datanyze.</p><p>Because of their dominance, advertisers spend heavily on these platforms.</p><table border=\"1\"><tbody><tr><th>Segment</th><th>Q4 2021 Revenue</th><th>YOY Growth</th></tr><tr><td>Google Search</td><td>$43.3 Billion</td><td>36%</td></tr><tr><td>YouTube Ads</td><td>$8.6 Billion</td><td>25%</td></tr></tbody></table><p>Source: Alphabet. YOY stands for (year over year).</p><p>Altogether, Alphabet&#39;s advertising segment brought in $61.2 billion and grew 33% with its Google Network division added in. These numbers lap 2020 COVID-suppressed revenue, and growth numbers will not be as impressive throughout 2022. But, advertising is not going away anytime soon.</p><p>Combined with its &#34;Google other&#34; segment, its services division ran at a 37% operating margin and remained the only profitable segment within Alphabet. Advertisements keep the lights on at Alphabet headquarters, and with two premium advertisement platforms, investors should be confident in these two segments&#39; futures.</p><p>Alphabet is trading at an attractive 26 times earnings -- not too shabby for a company with 32% revenue growth.</p><p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/4c2e31e42eb5f0be47549ec1c5c62701\" tg-width=\"720\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/><span>GOOG PE Ratio data by YCharts.</span></p><p>The stock isn&#39;t anywhere near its valuation peak, even though it is close to setting all-time highs. And that should ease fears about buying a stock with inflated valuations, as 26 times earnings is nowhere near expensive for the company.</p><p>Alphabet is a strong buy regardless of which way investors view the stock. Those who hold onto the stock for three to five years will reap the benefits of a stock split, potential stock buybacks, an acquisition or two, and a lot of cash generated. Alphabet is a no-brainer stock. Even though it is near its all-time high, investors of all backgrounds could find a place for Alphabet in their portfolios.</p></body></html>","source":"fool_stock","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>3 Reasons to Buy Alphabet Stock Before Its Stock Split</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\n3 Reasons to Buy Alphabet Stock Before Its Stock Split\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-02-06 08:36 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.fool.com/investing/2022/02/05/3-reasons-to-buy-alphabet-stock-before-its-stock-s/><strong>Motley Fool</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Key PointsCompanies that split stocks tend to perform well over the short run.Alphabet has several business segments that are beginning to heat up.The amount of cash Alphabet generates and has on its ...</p>\n\n<a href=\"https://www.fool.com/investing/2022/02/05/3-reasons-to-buy-alphabet-stock-before-its-stock-s/\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"GOOG":"谷歌","BK4077":"互动媒体与服务","BK4559":"巴菲特持仓","BK4538":"云计算","BK4507":"流媒体概念","GOOGL":"谷歌A","BK4561":"索罗斯持仓","BK4122":"互联网与直销零售","BK4550":"红杉资本持仓","BK4514":"搜索引擎","BK4532":"文艺复兴科技持仓","BK4525":"远程办公概念","BK4503":"景林资产持仓","BK4548":"巴美列捷福持仓","BK4553":"喜马拉雅资本持仓"},"source_url":"https://www.fool.com/investing/2022/02/05/3-reasons-to-buy-alphabet-stock-before-its-stock-s/","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"2209479633","content_text":"Key PointsCompanies that split stocks tend to perform well over the short run.Alphabet has several business segments that are beginning to heat up.The amount of cash Alphabet generates and has on its balance sheet is reason enough to invest.Alphabet (NASDAQ:GOOG) has proven quarter after quarter why it is one of the best businesses on Earth. The Google search engine, YouTube, and Google Cloud parent company has a nearly $2 trillion market cap, making it the third-largest company in the U.S.During its fourth-quarter earnings report issued on Feb. 1, Alphabet announced an astounding $75 billion in revenue for the quarter and $257 billion for the entire year. These mind-boggling numbers become even crazier when the 32% quarterly and 41% annual year-over-year growth rates are accounted for.Still, these fantastic results were overshadowed by management's announcement to split the stock 20-for-one. The nearly $3000 stock will begin trading for around $150 after the Fourth of July holiday in 2022. While a stock split does not affect the business, stocks often do well after announcing a split -- just look at Tesla's and Apple's performances during August 2020 after each company announced a split.TSLA data by YCharts. (Tesla announced its split on Aug. 11, and Apple during its earnings.)Despite this potential catalyst, I believe there are three stronger reasons investors should consider buying shares now.1. Cash stockpiles and generationAs of Dec. 31, 2021, Alphabet had a jaw-dropping $139.6 billion in cash and marketable securities on its balance sheet and a mere $14.9 billion in debt. Having a war chest sitting around enables Alphabet to purchase whatever it wants. During its Q4 conference call, CEO Sundar Pichai mentioned looking into a blockchain solution for Web3 (which could fuel the metaverse). Alphabet may go shopping for a company to fulfill this desire -- and can make it happen with its resources.Should Alphabet blow even half its cash on an acquisition, investors shouldn't fear; Alphabet will just generate more next year. Throughout 2021, Alphabet converted $67 billion of its $257 billion in revenue into free cash flow. If it doesn't spend its money on acquisitions, management may repurchase more stock -- they repurchased $50 billion throughout 2021. Regardless of what management decides, Alphabet's cash hoard and generation make it a fantastic investment.2. The sun is starting to shine through Google's CloudIn the battle for cloud computing supremacy, Google has not overcome Amazon Web Services' and Microsoft Azure's leads. However, Google Cloud is far from a lackluster segment. During Q4, its quarterly revenue grew 45% year over year to $5.5 billion and increased at a 47% clip throughout 2021. While Google Cloud still lost $890 million, much can be attributed to costs associated with expanding server infrastructure -- showing Alphabet hasn't given up on its cloud offering.Image source: Getty Images.Although Google Cloud may never overtake Azure or AWS, the deals Alphabet saw during Q4 should give investors hope. Management cited \"backlog increasing 70% to $51 billion most of which can be attributed to Google Cloud\" during its Q4 conference call. Additionally, it saw 80% growth in deal volume and a 65% increase in deals over $1 billion. Google Cloud is picking up steam, and investors should consider owning Alphabet's stock because of it.3. Google and YouTube are category leadersAlphabet owns two businesses with an insane market share in their respective categories.SegmentMarket ShareGoogle Search Engine86%YouTube76%Data source: Statista and Datanyze.Because of their dominance, advertisers spend heavily on these platforms.SegmentQ4 2021 RevenueYOY GrowthGoogle Search$43.3 Billion36%YouTube Ads$8.6 Billion25%Source: Alphabet. YOY stands for (year over year).Altogether, Alphabet's advertising segment brought in $61.2 billion and grew 33% with its Google Network division added in. These numbers lap 2020 COVID-suppressed revenue, and growth numbers will not be as impressive throughout 2022. But, advertising is not going away anytime soon.Combined with its \"Google other\" segment, its services division ran at a 37% operating margin and remained the only profitable segment within Alphabet. Advertisements keep the lights on at Alphabet headquarters, and with two premium advertisement platforms, investors should be confident in these two segments' futures.Alphabet is trading at an attractive 26 times earnings -- not too shabby for a company with 32% revenue growth.GOOG PE Ratio data by YCharts.The stock isn't anywhere near its valuation peak, even though it is close to setting all-time highs. And that should ease fears about buying a stock with inflated valuations, as 26 times earnings is nowhere near expensive for the company.Alphabet is a strong buy regardless of which way investors view the stock. Those who hold onto the stock for three to five years will reap the benefits of a stock split, potential stock buybacks, an acquisition or two, and a lot of cash generated. Alphabet is a no-brainer stock. Even though it is near its all-time high, investors of all backgrounds could find a place for Alphabet in their portfolios.","news_type":1},"isVote":1,"tweetType":1,"viewCount":442,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":6,"xxTargetLangEnum":"ORIG"},"commentList":[],"hasMoreComment":false,"orderType":2}