Will GOOG Stock Split in 2017?
BUZ INVESTORS Alphabet Inc Stock Split If you arrived at this page by searching “Google stock split date 2017,” you’re probably a retail investor. But more importantly, you’re probably upset at Alphabet Inc (NASDAQ:(GOOG). How can you be expected to dish out $920.00 for one share of Google stock? It’s absurd.
You want to own GOOG stock, of course, but only if there is a GOOG stock split in 2017. At least then it will be affordable.
The good news is that Google has split its stock before. Better still, other tech giants—I’m looking at you, Apple Inc. (NASDAQ:(AAPL)—have also split their stocks in recent years. So it would be well within the norm for Google stock to be sliced and diced in the coming months.
I personally think it can help investors take advantage of stock splits, but you won’t hear financial “experts” talking about this on TV…
Why? Because you are not their target audience. Wall Street is their target audience. And when it comes to the price of a stock, Wall Street doesn’t know or care about the difference between $9.00 and $900.00. They’re investing millions of dollars, so the sticker price doesn’t matter.
Alphabet Inc Stock Split
The same cannot be said for retail investors.
Many retail investors start off with tiny portfolios. They may want to anchor those portfolios with a technology giant like Alphabet, but GOOG stock is out of reach at $920.00 a pop.
That’s a real shame, especially because Google is still capable of massive growth. Don’t be fooled by its enormous size. There’s still plenty of gas in the tank.
How Dollar-Cost Averaging Works
Like I said before, DCA is a trick used by some of the greatest investors of all time.
All you have to do is resist the urge to buy all your shares in a lump sum.
The idea is to be patient. Load up on a few shares, then wait. Add a few more (or a lot more if the price drops) later on. Repeat this process until your investment thesis is dead.
Google Stock Split History
There’s another reason to believe we’ll see a GOOG stock split in 2017: Namely, that it’s already happened once before.
|Google Stock Split History|
|March 27, 2014||2-for-1|
Here’s how it went down:
On March 27, 2014, the number of outstanding shares of GOOG stock doubled. If you owned 10 shares before the split, you owned 20 afterwards. But there was no change in your net position, because the price was cut in half as well. That’s how splits work.
It’s important that investors understand this. Stock splits don’t increase your returns in any way—they just alter the price you see on your trading platform.
Why Google Will Split Its Stock
Now you may be thinking:
“This is a dumb metaphor, Gaurav. No one in their right mind sells individual cigarettes. And even if they did, no one buys individual cigarettes.”
You’re right, of course.
Convenience stores don’t sell individual cigarettes…in America. They do in India. They do in Ethiopia. They do in lots of places where people aren’t as rich as they are in the United States.
The horrible truth is that not everyone can afford to buy a full pack of cigarettes.
Think about that for a minute, because the same concept applies to stock splits.
Someone making $3.5 million a year on Wall Street does not care whether Google stock tops $1,000. But you know who might be put off by it? The guy making $35,000 a year working on Main Street. That guy may feel like Google stock is too expensive.
As I demonstrated above, stock splits can draw in a whole new class of investors. In turn, this added volume can open the stock’s upside, thus leading to gains that would otherwise never have been achieved.
That said, the sticker price could look very different depending on the ratio of the split. Here’s a quick breakdown I threw together.
Although a 7-for-1 GOOG stock split seems unlikely, it could be necessary. You see, Google’s co-founders, Larry Page and Sergey Brin, signed the Giving Pledge.
The Giving Pledge is a commitment for billionaires to give away most of their wealth to great philanthropic efforts. In a practical sense, it means that Brin and Page have to keep selling off their Google stock so they can give it away. But they don’t want to give up control of Google.
|Industry:||Online Media » Internet Content & Information NAICS: 519130 SIC: 7375|
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Alphabet is a holding company with Google, the Internet media giant, as a wholly owned subsidiary. Google generates 99% of Alphabet revenue, of which more than 85% is from online ads. Google’s other revenue is from sales of apps and content on Google Play, YouTube Red and cloud service fees, and other licensing revenue. Alphabet’s moonshot investments are in its other bets segment, where it bets on smart homes (Nest), technology to enhance health (Verily), faster Internet access to homes (Google Fiber), self-driving cars (part of X), and more.
Guru Investment Theses on Alphabet Inc
GoodHaven Funds Comments on Alphabet – Jan 27, 2017
While hardly unknown, Alphabet (NASDAQ:GOOGL) continues to grow at a rapid rate for such a large company. Alphabet’s scale is staggering, with at least five applications used regularly by more than a billion people and the largest digital ad platform in the world. It also owns YouTube, which as a standalone business would be larger than most television networks, and Android, the most widely used operating system on smartphones and increasingly on other devices.
On an annual basis, the company is expected to generate close to $40 per share in earnings, despite still losing about $4 per share after-tax in its corporate venture capital investments. The stock is no longer cheap, but neither is it overpriced given its valuation, prospects for growth, and generation of free cash flow. Recently, for the first time, the company approved a significant share repurchase. With nearly $120 per share in cash and almost no debt, the company is in a unique position to be able to spend heavily to improve its business and benefit its shareholders at the same time. Its biggest threat would appear to be regulation rather than direct competition.