Triggers for a Google Stock Split Speculation on Amazon and Dow Inclusion Bets
The decision by Google to divide its $3,000 stock is fueling speculation that it could be included in the Dow Jones Industrial Average, but a similar move by Amazon might complicate matters for index administrators.
Shares of Google (GOOGL)-Get Alphabet Inc. Class A Report are likely to start at a new high on Wednesday, but the increase may be due to what the tech giant did to attract a new class of investors rather than its excellent top and bottom lines.
Google’s parent company, Alphabet, announced plans for a 20-for-1 stock split in July, leaving investors with one Google stock and a dividend payout of 19 extra shares, all valued at about $160 apiece (based on today’s opening bell price).
Related Google stock split : Triggers for a Google Stock Split Speculation on Amazon and Dow Inclusion Bets
Google reported record profits of $20.6 billion, or $30.69 per share, for the three months ending in December, a 37.6% increase over the same period last year and far ahead of the Street consensus of $27.48 per share.Revenues increased by 32.3 percent to a new high of $75.3 billion.
Google shares were trading at $3,013.25 per share in early trading on Wednesday, up 9.5 percent.Earlier in the day, the stock touched a new high of $3,030.93.
The decision to split the shares follows similar moves by Apple (AAPL)-Get Apple Inc. Report and Tesla (TSLA)-Get Tesla Inc Report in the last two years, making Google stock a more appealing and accessible proposition for retail investors who, aided by a slew of mobile trading apps and zero-commission brokers, have found their collective power capturing the attention of the world’s most powerful corporations.
It also paves the way for inclusion in the Dow Jones Industrial Average, the mother of all global indices. The price-weighted Dow, which is administered by S & P Dow Jones Indices, uses the Dow divisor, a figure that measures the effect of a stock price change on the overall average, to smooth out the vagaries of splits and dividends in its 30 stock collection.
At $3,000 a share, however, even a tiny price move in Google would be much too disruptive for the typical investor, which may explain why, despite its market-leading position in global e-commerce and a $1.9 trillion market valuation, it’s on the outside looking in.
However, at $160 a share, the math changes, and Google might be on its way to being included in the Dow later this year, despite the Dow’s scandalously low tech sector representation.
But who would it take the place of?
With a market valuation of barely $122 billion and a stock that has plummeted over 20% in the last five years, International Business Machines (IBM)-Get International Business Machines Corporation Report seems to be the most plausible target. With a market worth of roughly $200 billion, Intel Corp. (INTC)-Get Intel Corporation Report, as well as Cisco Systems (CSCO)-Get Cisco Systems, Inc. Report, may be swapped.
The decision to replace one of the technology’s ageing guards is not unprecedented: AT&T (T) has been slammed by Apple. Get AT&T Inc. Report from its Dow perch in March 2015, little over a year after the iPhone manufacturer (now the world’s largest business) announced a 7-for-1 stock split in June 2014.
S&P Dow Jones Indices, on the other hand, isn’t above dumping big-name companies off its bellwether: Pfizer (PFE)-Get Pfizer Inc. Report, along with Exxon Mobil (XOM)-Get Exxon Mobil Corporation Report and Raytheon RTX, was delisted in the summer of 2020 to make room for Amgen (AMGN)-Get Amgen Inc. Report, Salesforce (CRM)-Get salesforce.com, inc. Report, and Honeywell (HON)-Get Honeywell International Inc. Report.
Related Google stock split : Spotify, Discord, and Snapchat have been partly restored after a Google Cloud outage that knocked the applications down.
However, if Amazon (AMZN)-Get Amazon.com, Inc. Report, which reports on Thursday, follows its major tech counterparts and splits its four-figure stock, the index manager may have an even more difficult choice to make.
P & SAmazon is classified as a consumer discretionary company by Dow Jones Indices, while Google is classified as a communications services firm, but both have a strong argument for inclusion in the Dow because of their sector domination and planet-like effect on global financial markets.
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