Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) stock has announced a 20-for-1 stock split effective on July 15, 2022, and a strong fourth-quarter FY21 earnings report. GOOG stock had a closing price of $2,872.85 on April 4, 2022, and is flat in 2022, whereas it has gains of nearly 13% in the previous month and 29% in the past 1-year.
Can GOOG stock reach $3500 before the stock split, how likely is this and why does it matter? First, the rationale behind this $3500 price target is based on several predictions.
Money CNN has a median target of $3,500 for GOOG stock, a high target of $3,900, and a low target of $3,150. On Tipranks the average price target for GOOG stock is $3,482.50. On Yahoo! Finance the average price target is $3,417.
The two average prices are close to the median price so we can accept that the main price target of $3,500 has a lot of validity. If this target is achieved before the stock split on July 15, that would represent a return of nearly 22% in the following three months. It would be a great return in such a short time. What should investors do now? And how likely is this price target to be achieved?
The stock split does not change at the valuation of GOOG stock, as “Each shareholder at the close of business on July 1 will receive, on July 15, 19 additional shares for each share of the same class of stock they own.”
So, if a stock split was to occur on April 4, 2022, GOOG stock would be adjusted to $143.64 automatically, dividing $2,872.85 by 20 and each shareholder would have the same amount invested assuming all other factors remained constant. Investors who like GOOG stock, especially after the stellar Q4 FY21 earnings should be indifferent and could invest now rather than wait.
In Q4 FY21, Alphabet reported a 32% year-over-year increase in revenues to $75,325 million and a 35% in net income to $20,642 million, with strong growth in the advertising and Cloud business and quarterly sales record for the Pixel phones.
Strong profitability is a driving force of an appreciating stock price. Considering that GOOG stock needs to have an average gain of nearly 7% for the next three months until the stock split occurs, the above price target is not an excessive one and is likely but of course not guaranteed.
As the stock split date approaches, GOOG stock has the potential to move higher given its latest strong financial performance. The best idea is to gradually invest in GOOG stock before and after the stock split to take advantage of both scenarios, a likely rally before the split and another likely rally after the split.
On the date of publication, Stavros Georgiadis, CFA 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.
