Alphabet, the compounder that keeps on giving
What market crash? Alphabet is almost back to its November highs despite a market correction that sent the NASDAQ down 10%.
What’s the big deal? The tech giant reported strong earnings with profits nearly doubling in 2021 — despite fears of growth slowing post-COVID and an advertising assault from AAPL.
The advertising industry took a big hit when AAPL made it harder for advertisers to track users.
- Google’s search revenue jumped 36%, Youtube growth slowed to 25% and cloud sales grew by 45%.
- CEO Sundar Pichai left us with a bullish comment on the earnings call — saying its a “very strong quarter for ads”.
EU and US regulators are hitting Alphabet with lawsuits and legislations to rein in its dominance.
- Best case: More legal fees and lower chances of making big acquisitions.
- Worst case: Alphabet could be forced to split up some of its business units.
But lawmakers have been attempting to regulate tech giants for years — with little luck.
20-for-1: Your one GOOG share will now be split into twenty — and so will its value — meaning you’ll have more shares for the same total value.
Since many trading platforms already offer fractionalized investing, stock splits are seen as gimmicks. But it does give Alphabet a chance to join the Dow Jones Industrial Average market index — made up of 30 highly reputable companies — since:
- The DOW favors stocks with lower prices — given the way the index is constructed.
- E.g. AAPL was added to the index after it split its stock in 2015.
Is joining the DOW good? Inconclusive. As per Barrons, there’s been little correlation between stock price and DOW membership.