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Should You Buy GOOGLE Stock Before It Splits? | GOOGL GOOG Stock Analysis - YouTube
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okay so the next company on this list is
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google now google made a big
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announcement that they would reduce the
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cost to buy an individual share of their
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stock at some point this year they
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announced a 20-1 stock split so if you
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own one share it's gonna be broken into
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20 shares it's sort of like if you held
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a 20 bill and somebody split it into 21
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bills now there's been a few big stock
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splits that i've watched closely over
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the past couple of years for example
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when apple and tesla both split their
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stock in 2020 the stock saw a really
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huge rally before the eventual split
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then they both experienced a little bit
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of a slump before returning to higher
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highs now nvidia also announced a stock
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split last summer and the stock also had
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an incredible run between the
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announcement before the actual stock
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split actually took place now there's
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definitely some differences between
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nvidia tesla and apple when they did
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their stock splits the market was a lot
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more bullish in 2020 with the meme
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stocks and the small cap stocks hitting
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new highs and i also think that apple
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and tesla were priced a little high but
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relatively fair valued at the time when
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nvidia split we saw the run-up which
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occurred when the market was still
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extremely bullish but post split is
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about when the market became more
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neutral at least as far as meme stocks
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in the small cap stocks which i think
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was the same type of investor who was
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buying up these stocks during the split
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now nvidia did see a continued run post
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split but the stock did sell off and
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since then has returned to its price
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around the split i think the issue for
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nvidia was the stock was really just too
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expensive in the post split surge and in
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november i actually made a video about
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how i sold my nvidia shares because i
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thought the stock was too expensive even
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though i like the business i definitely
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took a pretty good amount of thumbs
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downs but it does look like that i sold
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near the top so i think what we need to
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consider for google is this is the
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current valuation low enough to support
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a massive run-up without becoming overly
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expensive and will there be enough
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momentum to drive a run-up of the share
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price so let's take a look at the
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valuation first so google reported its
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earnings on february 1st and they
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reported earnings of
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30.69 versus 2734 expected they also
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reported revenue of
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75.33 billion versus 72.17 expected
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google also saw one of their biggest
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winners advertising revenue at 61
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billion dollars which is up 33 from the
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46.2 billion they earned in the same
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quarter last year so when we look at
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this quarter compared to the rest of
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their earnings google has continued as
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the growth machine that we've seen in
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the past that 30 per share in red looks
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like a very solid quarter and seems like
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the continuation of the previous trend
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now when we look at the last 10 years of
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revenue and profits we can see pretty
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much the same growth trend reflected in
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the earnings per share growth what's
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incredible to me is that even at 182
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billion in revenue in 2020 google was
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able to grow by almost 30 for the full
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year earnings and almost doubled their
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profits going from 40 billion in 2020 to
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76 billion in 2021 when we look at
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google's revenue versus expenses their
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cost of revenue is just under half of
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the revenue which gives them the ability
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to have such high profit margins google
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spent 31 billion on research and
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development which you can see in blue in
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this chart and it hardly looks like
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anything so when we break down their
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segments i was surprised to see the
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google cloud segment actually doesn't
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produce any profit google actually loses
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between 3 to 5 billion on that segment a
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year while it only brings in about 9 to
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19 billion in revenue now the real store
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of the show is google services business
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which is made up mostly of their ads
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business it brings in all of their
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profits and almost all of their revenue
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over the past year google services
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brought in 237 billion in revenue and 91
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billion in operating profits which is a
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really insane number when we look at
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their forecasted earnings google is
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expected to continue growing from 257
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billion in revenue and 76 billion in
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profits to 398 billion in revenue and
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101 billion in profit by 2024. when we
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look at the forecasted growth for google
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the current expectation is for them to
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slow down between 14 to 17 over the next
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couple of years at that growth rate that
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would put google's fair value between 31
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for the bottom end of the range and 41
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for the top end of the range however
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when we go over to macro trends we can
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see that google typically trades towards
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the lower end of this range around 30 to
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25 so if we use my fair pe values
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between 31 and 41 that puts google at an
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extremely cheap valuation with the stock
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currently worth about 3 400 to 4 600
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based off the current earnings per share
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and a 2024 upside of 4 700 all the way
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up to 26.86 by 2024. even if we use a
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more conservative valuation with the p e
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ratios the stock has recently traded
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around we can see that still puts google
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around the bottom end of its current
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fair value range by 2024 this puts their
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upside around 3 800 or 33 percent higher
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than today's share price and a top end
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of the range around 4 600 or 60 percent
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higher than today's share price so
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google is definitely a buy right now i
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think it's very possible that as we get
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closer to the stock split happening that
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a lot of people for whatever reason are
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gonna buy up the stock just to see their
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shares that they own go from one share
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to 20 shares again stock splits really
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don't change the value of a stock but
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what we can definitely see from this
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valuation is google is absolutely
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undervalued right now
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now that video that you just watched is
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part of a much larger video where i
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covered earnings for multiple stocks so
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if you want to see that video click this
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right here and as always
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thanks for watching
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