- There’s much talk surrounding Alphabet’s (GOOG) third quarter stock split.
- Market health and earnings should be the trading and conservation points in GOOG.
- Bullish long-haulers in GOOG stock may smartly hedge for accumulating on weakness.
Red-hot inflation. At-risk consumers. Earnings. Supply chain disruptions. A stalling global economy. They’re investment considerations inexorably tied to today’s stock market. Yet amid those mostly bearish underpinnings, the financial media can’t get enough discussing upcoming stock splits, including Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) stock split. And for seemingly good reasons too.
With Tesla (NASDAQ:TSLA), Shopify (NYSE:SHOP), Amazon (NASDAQ:AMZN) and GameStop (NYSE:GME) in mind, there’s four big reasons to care about stock splits. The fifth is that despite zero benefit to the company’s business and in theory, stock splits have historically added value to shares and helped them outperform.
That brings us to Alphabet. During the tech giant’s Q4 earnings call, GOOG’s management announced board approval for a 20-for-1 stock split on July 15.
Importantly, blanket stock performance surrounding a split fails to account for more pressured and still inflated market valuations like that in today’s market. Furthermore, we’re still three full months away from the split coming to fruition, but there are more pressing developments in GOOG stock that stand to help or hinder investors salivating over the Alphabet share split.
| Ticker | Company | Current Price |
| GOOG | Alphabet | $2,563.76 |
There’s More Than Just a GOOG Stock Split to Consider
While investors can be dogmatic about the importance of buying GOOG stock for this summer’s share split, InvestorPlace’s Will Ashworth noted a much more important announcement for Alphabet shares, which is already hard at work at providing shareholder value.
Yesterday, Alphabet’s CEO Sundar Pichai announced the tech giant is investing $9.5 billion on its U.S. offices and data centers this year. The decision should result in 12,000 new full-time jobs. If history is any indicator, this news should matter a great deal more to GOOG stock investors than a share split.
As Will smartly spells it out, job creation like Alphabet’s is one of the single best indicators of a growing company. And it bodes very well for the company looking forward and GOOG stock’s longer-term share performance.
Also, closer to today’s action, Alphabet investors have earnings scheduled for April 26 to clear the air. Last quarter’s report was a huge success financially for the company. It also offered a stunning near 10% price jump to all-time-highs in the report’s immediate aftermath.
Bears Are Having a Say In What Matters Too
Source: Charts by TradingView
A significant determinant in stock performance, especially for heavily weighted stocks like GOOG, is the broader market itself. Thus, during corrective or more bearish cycles, earnings, stock splits and even smart investments are typically going to be challenged (if not thrown under the bus).
And let’s just say the signs of an aggressively priced, if not outright frothy stock market are here, then there’s potential for a more significant bearish cycle ahead.
Further, today’s price chart in GOOG stock is warning that a market rally off March’s correction is standing on an unstable foundation. Technically, shares are nearing a fifth challenge of lateral support stationed just above a classic bear market signal defined by a 20% correction. That’s troubling.
Bottom Line on GOOG Stock
Should investors expect that owning GOOG stock in 2022 will be a good idea because of Alphabet’s pending share split? As discussed above, it’s not that simple. In fact, purchasing the stock for that reason is setting yourself up for disappointment.
Investors could take a chance and buy GOOG with a stop-loss just below chart support as shares enter a bear market. But today, earnings risk also exists. Bullish investors holding through the event did well last time, but only briefly. Moreover, they’re underwater at this time. That offers further evidence they’re not messing with riskier market conditions.
Ultimately, I love Alphabet’s Google search and YouTube as much as the next person. But even Peter Lynch might shy away from today’s riskier proposition to “buy what you know”, despite how well you may enjoy those products.
If investors simply can’t be persuaded to show some restraint, as a core portfolio holding, a GOOG stock collar can make accumulating on further weakness a much easier investment strategy.
On the date of publication, Chris Tyler 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 InvestorPlace.com Publishing Guidelines.
