Google’s parent company, Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), will introduce a 20 – 1 stock split on 15 July. The split will reduce Alphabet’s price to around $115 from $2,300, but it will not change the company’s market cap.
Lower prices might attract retail investors to Alphabet. Moreover, the company could generate increased liquidity via options trading, as one options contract epitomizes 100 shares. Furthermore, its lower share cost might translate to price-weighted DJOA inclusion. Though Q1 earnings and revenue miss might mean instability, these reasons prove a ‘buy’ ahead of the stock split.
Unconquerable Advertising Business
Google’s advert business accounted for 80% of Alphabet’s Q1 revenue. However, its advertising business is not immune to macro challenges as its saw temporary slowdowns amid the Recession and COVID pandemic but always rebounded from the downturns.
Google’s yearly ad revenue hiked to $209.5B from $36.5B from 2011 to 2021. EMarketer predicts Google will boast 27.7% of the US ad market this year, surpassing Meta Platform and Amazon and dominating markets outside China. Thus, you can invest in the platform if you trust it will overcome ongoing macroeconomic challenges.
An Inescapable & Expanding Ecosystem
Google has had its core business of rapid growth as its ecosystem remains practically unavoidable. It owns the leading video streaming platform (YouTube), top digital mapping services (Google Maps), top mail service (Gmail), most popular browser (Chrome), leading search engine, and globally used OS (Android). You can invest in the company if you believe in no future without these essential digital services.
Rapidly Expanding Cloud Business
Google runs the 3rd-largest cloud infrastructure network globally after Amazon’s AWS and Microsoft’s Azure. Google Cloud boasted 8% of worldwide market shares in Q1, compared to AWS (33%) and Azure (21%).
Though Google Cloud will not challenge AWS or Azure soon, its revenue gained 53% in 2019 to $8.9B, 46% in 2020 to $13.1B, and 47% in 2021 to $19.2B. That means growing quicker than AWS & at an akin pace to Azure.
Google Cloud will likely maintain impressive growth in the long-term, attracting retailers that do not want to interact with Amazon or Microsoft’s straggling software ecosystem. The expansion would gradually decrease Google’s reliance on the ad business.
Editorial credit: rafapress / shutterstock.com
