By
Godfrey Benjamin
April 18th, 2024
The analyst notes that the GOOGL stock is under pressure due to concerns about a slowing economy that might result in reduced ad spending.
Earlier this year in February, Google‘s parent firm Alphabet (NASDAQ: GOOGL) announced its decision of a 20:1 stock split. On Monday, July 18, the Alphabet stock finally started trading at the adjusted price.
As of Monday’s closing, GOOGL was trading 2.46% down at a price of $109. The stock split means that for each share of GOOGL that the investors own, they would receive an additional 19 shares. This is the company’s first stock split in eight years since 2014.
Along with other major tech players, Alphabet has been facing the heat of the market meltdown. The Alphabet stock has already corrected 25% year-to-date. The recent stock split will increase retail participation as the stock becomes more affordable to investors. Note that the stock split doesn’t have any impact on the intrinsic value of the company. It’s just that the number of outstanding shares in the market grow considerably.
Amid the current bear market on Wall Street, some of the top tech companies have considered a stock split. This includes names like Microsoft and Amazon who have announced similar stock splits over the last few months.
Analysts Bullish about Alphabet (GOOGL) Stock
Amid the strong correction on Wall Street, the technology sector has particularly taken a major hit. While the Nasdaq 100 is down 26.5%, similarly Alphabet has also corrected by 25% year-to-date.
At the current price of $109, Alphabet (NASDAQ: GOOGL) could be a good buy. Over the past four quarters, Alphabet has reported $5.53 EPS and is currently trading at a price-to-earnings multiple of 20.2. This makes it 18% cheaper than the Nasdaq 100 which is trading at a price-to-earnings multiple of 24.7. Morningstar senior equity analyst Ali Mogharabi sees the fair price of the stock at $180.
The analyst notes that the GOOGL stock is under pressure due to concerns about a slowing economy that might result in reduced ad spending. However, Mogharabi believes that “digital ad spending is likely a bit less impacted than overall ad spending”. The analyst explains three factors that can contribute to further upside in the GOOGL stock.
“Alphabet still has room for further YouTube monetization and monetization of Maps. Also, the cloud business will continue to do well. Alphabet dominates the online search market with Google’s global share above 80%, via which it generates strong revenue growth and cash flow. We expect continuing growth in the firm’s cash flow, as we remain confident Google will maintain its leadership in the search market,“ said the expert.