Usually, there is no reason to hype up Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) stock. It is one of the safest and best investments out there. However, due to the announcement of its upcoming stock split, there is renewed interest in this safe performer.
GOOG stock is due to split on July 1. Investors are marking their calendars for this event. In anticipation of the stock split, the markets are turning bullish on GOOG stock again. It is a phenomenon we have seen frequently regarding stock splits. Major companies like Amazon (NASDAQ:AMZN), Tesla (NASDAQ:TSLA) and others had seen this happen to their shares when they announced their respective splits.
The reason for the stock split is that Alphabet wants retail investors to gain access to the stock, which is too expensive. For the long-term investor, not much will change.
Alphabet comprises several segments, including Google Services (Google Ads, Google Maps and Google Search, among others), Google Cloud and Other Bets.
The crown jewel of its business is the search engine. Google is the most dominant search engine in the world. It has a market share of over 90%, and it is estimated that it will continue to hold this position for the next few years.
The dominance of Google in the search market has been attributed to its innovation, quality and wide range of services. The company also offers users an opportunity to purchase ads on their platform.
You will struggle to find a more rock-solid enterprise from a fundamentals perspective. You can still take advantage of the gain in the run-up to the split for short-term traders.
Enviable Business Model
Alphabet is an umbrella company that consists of multiple companies under its umbrella.
Alphabet, formerly known as Google, is an especially diverse company that’s set out to change the world in various ways. They have large-scale environmental initiatives and software services that have improved lives around the globe. Their most famous products are their search engine and cloud computing services used on countless devices every day.
Advertising revenues are the company’s core business. In 2021, out of the total revenue pie, more than 80%, or $209.49 billion, came thanks to Google ads. Google has been the market leader for over a decade with online advertising. Industry executives have found that using their services allows you to advertise effectively and collect valuable data and insights into the customer’s demographic, which can help improve future advertising campaigns.
Google’s business segmentation is done into different areas, including Search, YouTube, Maps and other websites. Its fastest-growing segment is YouTube.
The online video sharing platform benefits from advertisers’ shift towards digital advertising. This has meant that YouTube is a major platform for brand marketing.
YouTube’s ad revenue comes from three main sources: ads on videos, pre-roll ads and subscription revenue. In addition, YouTube TV, YouTube Music and YouTube Premium have seen significant subscription numbers that have allowed the company to generate impressive revenue.
However, Alphabet is not a one-trick pony. You get a diversified revenue mix when you invest in GOOG stock. One of the fastest-growing segments of Google is cloud computing.
In 2021, Google Cloud services and revenues accounted for 7.5% of Google’s total business revenue. Quietly, the company has become the third biggest cloud service behind Amazon and Microsoft.
Regulatory Headwinds for GOOG Stock
Big tech is constantly changing the way we live and work. It has brought a lot of innovations to the market and has made our lives more convenient. However, with the rapid growth of the big tech, there have been many concerns regarding the privacy and safety of personal data.
The need for regulation is growing as big tech becomes more powerful and influential. The European Union Directive on Data Protection was enacted to protect people’s data from being abused by companies like Google, Meta (NASDAQ:FB), Amazon and Apple (NASDAQ:AAPL).
Many people feel that big tech companies should be regulated to ensure consumers are protected from monopolies and fair competition. The U.S. government is responding to these concerns. For example, President Joe Biden surprised many with his decision to appoint Lina Khan as head of the Federal Trade Commission. The antitrust law professor at Columbia University is a vocal critic of big tech, and therefore the appointment ruffled a few feathers.
So far, Google has been doing a good job of warding off regulatory activity. However, things could become more intense in space soon.
In addition, Amazon is gaining ground on Google in terms of share of all U.S. search ad revenue, according to eMarketer. More people are spending their search ad budget with Amazon, especially considering its performance during the pandemic. Alphabet is diversifying into several areas. It needs to keep its main bread and butter keyword search since that’s its main revenue generator.
Stock Split Doesn’t Change GOOG Stock Story Much
Companies that have gone through a stock split often see their share price drop and increase liquidity in their trading market.
Alphabet wants more retail investors to be able to buy GOOG stock through a share split. There is also the possibility that the move may lead to the stock joining the price-weighted Dow Jones Industrial Average. Considering the impact of Reddit investing on the finance world, it is not surprising. However, things will not change much for the tech giant in the long run.
In the short run, though, investors will chase the split. Therefore, there are profits to be made.
On the publication date, Faizan Farooque 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.
