Alphabet Is an Opportunity for Many Reasons

  • Google (GOOG,GOOGL) is beefing up security with its planned purchase of Mandiant (NASDAQ:MNDT) sometime this year.
  • CEO Sundar Pichai outlined plans to spend aggressively on data centers and office infrastructure.
  • Don’t discount the upcoming stock split. 

Source: turtix /

Now is a good time to load up on Google (NASDAQ:GOOG,NASDAQ:GOOGL) stock. Bearish sentiment is again mounting, echoing the idea that the search, cloud, and tech giant is finally reaching some sort of permanent downturn. That seems incredibly unlikely as the company is arguably as strong as ever. 

Three major reasons for bullishness in Google shares are outlined above. Let’s jump into those below as Google plans to purchase Mandiant, invest in data centers and office space, and undertake a stock split. 

GOOG Alphabet Inc. $2,390.12

Mandiant Plans

About six weeks ago, Google announced its intent to acquire Mandiant, a cybersecurity firm. The all-cash $5.4 billion deal is expected to close sometime before the end of 2022. That implies that it doesn’t have much ability to move prices in the near term. 

While that is likely true, it is a strong move for Google as it signals the firm’s intent to increase security, especially within its cloud. Mandiant is well-known for the Mandiant Advantage Platform, which has been extensively utilized to study and analyze security breaches and events. 

Google will get not only that platform, but also control over Mandiant’s consulting services. That means Google’s laggard cloud will be counting on Mandiant to help it turn a new page. Although Google Cloud is growing fast, it did not manage to post a profit at the time the deal was announced. Amazon’s (NASDAQ:AMZN) Amazon Web Services controls 32% of the cloud globally, while Microsoft (NASDAQ:MSFT) Azure accounts for 17%. 

Google controls a relatively low 7% and is clearly looking to increase that share while seeking cloud profits. Mandiant gives it a much better chance of doing so, as it can sell the platform and consulting services while upping security within its native cloud. 

Infrastructure Build Continues

Two weeks earlier, Chief Executive Officer (CEO) Sundar Pichai announced that the company is investing $9.5 billion to build data centers and offices this year. The company invested $37 billion across 26 states in data centers and offices over the past five years. That equates to an average of $7.4 billion annually over that span. So, the company is ramping up its investment on a relative basis in 2022. 

The company noted that the move could strike some as being illogical. After all, the move toward remote work has taken significant shape over the past few years. 

To counter that point, the company is pitching the economic growth and job creation angle. That makes a lot of sense. Google states that its $37 billion investment over the past five years created 40,000 full-time jobs. It anticipates that the $9.5 billion investment will create an additional 12,000 full-time Google jobs in 2022. 

GOOG Stock Split 

Yes, the final reason I’m bullish on Google is its stock split. It might feel like beating a dead horse at this point, but the stock split is a good thing. 

Readers will be aware that stock splits don’t magically increase the pool of earnings distributed to shareholders. So, when Google splits the stock 20-for-1 in July, investors get the same earnings per share (EPS), just split 20 ways. 

It’s the psychological effect that really matters. Google shares that used to trade for $3,000 per share will suddenly trade for $150. That makes the company seem much more approachable to investors, although little has changed. It’s the same reason Tesla (NASDAQ:TSLA) and Amazon are undertaking similar splits. 

What to Do With GOOG Stock

Google is expected to post a 2% lower EPS this quarter. It could logically drop on the news. However, I’d pick it up just after earnings are released because its shares have shown their resilience over and over. Google is always in the headlines by dint of its position as one of the most valuable and often controversial companies in the world. But it always seems to bounce upward despite the wishes of those who revel in its downfall. 

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks.Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

Article printed from InvestorPlace Media,

©2023 InvestorPlace Media, LLC