Google parent Alphabet soars 8% after its blowout Q4 earnings beat and plans 20-for-1 stock split

• Alphabet soared 8% on Wednesday after posting solid Q4 results and announcing a 20-for-1 stock split.
• The stock split means each share owned by an existing shareholder will turn into 20 shares.

Google parent Alphabet's shares rose 8% in regular trading on Wednesday after the internet search giant posted solid fourth-quarter results that beat Wall Street analyst expectations.

At the same time as its earnings report late Tuesday, Alphabet announced a 20-for-1 stock split on each share of its Class A, Class B, and Class C stock. This means each existing share will be turned into 20.

Quarterly revenue came in at $75.33 billion, up 32% on a year ago and well above the $71.17 billion average estimate from analysts polled by Refinitiv. Earnings per share were $30.69, a solid beat on the $27.34 expected.

For full-year 2021, Alphabet reported revenue of $257 billion, up 41% on a year ago.

The tech giant's internet advertising business grew as marketers spent more to reach an audience who are increasingly shopping and searching online during the pandemic.

"Alphabet has benefited from a boom in digital advertising during the pandemic, one that has helped Google's parent report record quarterly revenues in the last three months of 2021," said Adam Vettese, an analyst at the investment network eToro.

"That boom has been driven by more people using the tech giant's search engine during lockdown and a sharp increase in global digital advertising spend, which is estimated to have grown more than 15% last year."

Stock splits — a move typically made when shares trade at prices above hundreds of dollars each — don't tend to carry any economic value for a company. They just reduce the stock's price, making it more affordable.

"The reason for the split is it makes our shares more accessible," Alphabet CFO Ruth Porat said on a conference call with reporters. "We thought it made sense to do."

Small investors, who sometimes flinch over the high stock prices of mega-cap tech companies, are likely to cheer the move.

Alphabet last traded 8% higher in Wednesday's premarket session at $2,979.13 per share, and is up 3.6% so far this year after falling alongside other tech stocks on the prospect of rising interest rates.

The stock closed at $2,752.88 on Tuesday, and if the split was calculated using that level, each new share would be priced around $138. Each existing shareholder would get 19 extra shares for every one they own, and the number of shares outstanding would rise from 663.7 million to more than 13 billion.

The move also opens the door to Alphabet being added to the Dow Jones Industrial Average. The benchmark is a price-weighted index, which has effectively shut out high-priced stocks such as Amazon and Alphabet.

Amazon itself hasn't split its stock since 1999 and has a four-figure share price. Meanwhile, Apple and Tesla both made stock splits in 2020.

Share splits haven't been that common in the US market though. Only two took place in 2019, far lower than the 47 splits in the S&P 500 over 2006 and 2007, according to Bloomberg.

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