The days of Alphabet (GOOG +2.20%) (GOOGL +2.12%) stock trading above $2,000 are numbered. And the magic number is 21. That's how many days remain before the technology giant's 20-for-1 stock split scheduled for July 15.
Investors often eagerly anticipate stock splits because they think shares could take off after the split. But will Alphabet soar after its upcoming stock split? Here's what history shows.
Not much to go on
Let's first address the significance (or lack thereof) of stock splits. They don't change anything about a company's business. They don't change a company's overall value. However, lower share prices can attract more retail investors to a stock. That's the only real reason why Alphabet's stock split matters.
NASDAQ: GOOGL
Key Data Points
With Alphabet's share price in the dumpster so far this year, the stock definitely needs a positive catalyst. Will the stock split on the way in a few weeks be just what investors want? History can sometimes be a guide.
Unfortunately, there isn't much history when it comes to Alphabet stock splits. The company has conducted only one stock split since its initial public offering in 2004. On March 27, 2014, Alphabet (then known as Google) split its stock 2-for-1.
There was considerable controversy surrounding this stock split. Google didn't just double its number of shares. Instead, the company created an entirely separate class of shares -- class C shares with no voting power.
What happened after this unusual stock split? Not much. Both Google class A and class C shares rose by around 2% over the next few days. However, the gains quickly evaporated. By the end of April 2014, both stocks had fallen by at least 4%.
There were more ups and downs to come in 2014. However, it's questionable that the stock split impacted the moves. Google went on to finish the year down close to 5%.
Recent precedents
We really can't learn much from the one stock split in Alphabet's history. But maybe recent precedents of other stock splits this year might help.
Amazon.com (AMZN +2.18%) stands out as the most highly anticipated stock split in the past month or so. The online shopping and cloud-hosting leader conducted a 20-for-1 stock split on June 6, 2022.
However, Amazon stock didn't take off after its split. Instead, shares fell. Why? Amazon's stock split came during a time when the overall market was struggling. The company also faces some challenges with its supply chain and rising inflation.
Another previous highflier, DexCom (DXCM +1.25%), also recently conducted a 4-for-1 stock split. The healthcare stock enjoyed an immediate bump. However, it was only a temporary one.
Again, the overall stock market weakness appears to be the biggest culprit holding DexCom back. The company's business is performing well with the international launch of DexCom's G7 continuous glucose monitoring device underway.
Three predictions
Based on these admittedly limited historical precedents, the safest prediction is that Alphabet stock won't soar after its stock split next month. There's a big caveat with that prediction, though. If the overall stock market rebounds in a major way before then, Alphabet's stock split could serve as a bigger catalyst than expected.
But here are two more predictions. One is that most investors will quickly forget all of the stock splits of 2022 that have received a lot of attention, including Alphabet's upcoming 20-for-1 split. The other prediction is that Alphabet will deliver solid gains over the next decade regardless of any stock splits.
Actually, Alphabet ranks as one of my three highest-conviction growth stocks right now. I like the company's business moat. I think it also has multiple growth drivers, notably Google Cloud and the Waymo self-driving car unit.
Maybe Alphabet's share price will never top $2,000 again. However, I don't expect the stock to stay near the $100 level for very long after the stock split in July.
