We'll always remember 2022 as a time when all three major indexes touched bear territory. But 2022 also brought us something positive. It was a year of stock splits. Many of the world's top companies completed these operations. Why are they something to get excited about? Because they make it easier for a broader range of investors to get in on a particular stock. They also suggest a company is confident about its business and the stock's ability to continue climbing.
Amazon (AMZN -0.91%) and Alphabet (GOOG 0.21%) (GOOGL 0.18%) completed stock splits last year. The stocks didn't rise then , but both stocks have advanced in the double digits so far this year. Is it too late to buy them? Let's find out.
1. Amazon
Amazon has had a rough time over the past year. Rising inflation increased its costs and hurt its customers' buying power. Amazon also faced a company-specific problem. After enormous demand in the earliest stage of the pandemic, it doubled its fulfillment network and then found itself with excess capacity.
But Amazon is doing a great job of handling all of those challenges. It's improving its cost structure, which is something that should help it perform during the difficult times and boost growth once the economic situation has improved. Amazon also is focusing on productivity across its fulfillment network.
It's also important to remember that Amazon is a leader in two high-growth markets: e-commerce and cloud computing. And sales still are climbing at the company even during difficult times. All of this -- along with Amazon's efforts mentioned above -- are positive signs for future earnings.
Now let's consider the price. Amazon shares have increased this year. But the stock still is trading at around its lowest in relation to sales since 2016. So it's definitely not too late to pick up this stock, which has what it takes to reward you over time.
AMZN PS Ratio data by YCharts.
2. Alphabet
Growth has slowed at Alphabet, the parent company of Google. For example, last year, revenue climbed 10% year over year. That's compared to a gain of more than 40% in the previous year.
Alphabet depends on advertising revenue, and in a difficult economy, companies often cut their advertising budgets. It's also true that Alphabet already is a market giant, so it's difficult to grow in leaps and bounds at this point.
Still, there are reasons to be very optimistic about the company. Its Google search-market share topped 90% as of March. And this isn't anything new. Google has maintained leadership at this level of market share over time. There isn't any reason to believe this will change.
Why is this important? Because that market dominance brings advertisers to Google. So even if there are times when budgets are tight and revenue doesn't grow as much as in the past, these situations are likely to be temporary.
Alphabet also has another bright spot that investors should like: its cloud-computing business. It isn't as big as Amazon's, but it's posting solid growth. In the most recent quarter, cloud revenue rose 32%.
Alphabet also has a solid track record of earnings growth. And today it trades for only 20 times forward-earnings estimates, down from about 28 a year ago. So now still is a great time to get in on this stock-split stock and benefit as it heads higher over the long haul.
