Alphabet Stock Is Now Cheap in More Ways Than One

A stake in Google parent company Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is much more accessible to small-scale investors after a stock split. Sure, some folks are concerned about an imminent recession and Alphabet’s hiring slowdown. However, GOOG stock might be included in the prestigious Dow Jones Industrial Average. That could give a boost to the Alphabet share price if it happens.

It’s no secret that 2022 has been a tough year for tech stocks. Do you remember when Snap (NYSE:SNAP) stock plunged 39% in a single day due to Snap’s disappointing earnings report? It was such a disaster that practically the entire technology sector dropped all at once.

GOOG stock suffered collateral damage that day, as did its sister stock, GOOGL. Yet, there’s no need to fear that you’ll be next if you invest in Alphabet. Indeed, there are reasons to stay in the trade, even if your portfolio size isn’t huge.

Ticker Company Price
GOOG Alphabet Inc. $113.60

Big News as GOOG Stock Gets Smaller

It’s a tale of two stocks if we’re talking about Alphabet. That’s because the company has two different stocks and also because the prices are very different now than they were just a month ago.

In case you didn’t get the memo, Alphabet enacted a 20-for-1 share split on Jul. 15. With that, Alphabet joined in the “summer of splits” as companies seek to bring more investors into the fold with more reasonable share prices.

All of a sudden, GOOG stock, the Class C version of the stock, cost around $113 per share instead of $2,255. Meanwhile, GOOGL stock, the Class A version, could be purchased for roughly $112 instead of $2,235. Also worth noting, especially for value hunters, is that Alphabet’s trailing 12-month price-to-earnings ratio is quite reasonable at 19.52.

One writer called Alphabet’s stock split “financial gimmickry,” but I disagree. Making stocks of great companies more affordable is, in effect, democratizing share ownership. Shouldn’t investors of all stripes get to participate in Alphabet’s growth and prosperity?

The Highbrow Dow

This isn’t to suggest that investing in Alphabet is entirely worry-free. After all, there may be an imminent recession. Plus, Google plans to slow its hiring for the rest of 2022 and that is probably not a positive sign.

Of course, Google isn’t the only tech company to slow its hiring pace. Snap, for example, plans to do this, as well. This doesn’t mean that Alphabet is doing something drastic, like slashing its current workforce.

Moreover, there’s a potential catalyst that could put GOOG stock in an elite group. It would confer prestige to Alphabet if the company were to join the 30 companies in the Dow Jones — and just maybe, this could happen in the near future.

As author Andrew Bary explains, the high price of Alphabet shares made it less likely that the company would be included in the Dow. That’s because, due to the way that Dow Jones stocks are weighted in the index, an expensive stock could have too much influence.

That problem is now eliminated as GOOG stock is much lower-priced. Perhaps the Dow Jones will have room for a highly profitable and influential technology giant like Alphabet.

What You Can Do Now

There’s no guarantee that Alphabet will join the Dow Jones Industrial Average. It’s an exciting prospect, though. Whenever someone invests in the index, that person would also be investing in Alphabet.

Sure, Google is slowing its hiring pace and that might raise a red flag, but only a small one. It’s certainly not the end of the road for the company. Furthermore, GOOG stock could attract more investors now that it is much more affordable. Feel free to join in and buy a few shares of this tech-market icon — no financial gimmickry, just great value.

On the date of publication, David Moadel 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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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