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Amazon vs. Alphabet: What's the Better Post-Split Buy?

·3 min read

Stock splits have gained serious traction over the last several years. Fortunately, it’s one of the more positive announcements that shareholders can receive.

Of course, a stock split doesn’t affect a company’s market capitalization.

However, it lowers the value of each individual share, providing ease for the stock price to multiply once again and provide investors with sizable gains.

In 2022, we’ve witnessed several titans undergo a stock split, including Amazon AMZN and Alphabet GOOGL.

It raises a valid question, which company looks like a better buy post-split? Let’s take a closer look.

Price Action & Quarterly Performance

Year-to-date, Amazon and Alphabet shares have both tumbled. However, AMZN shares have displayed a higher level of defense, declining roughly 27%, vs. GOOGL’s decline of nearly 30%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Upon shortening the timeframe to encompass just the last three months of price action, the winner is easy to spot, and it’s Amazon.

AMZN shares have tacked on a stellar 15% in value in this timeframe, easily crushing GOOGL’s decline of 5%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Google has consistently reported strong results, exceeding the Zacks Consensus EPS Estimate in seven of its last ten quarters. However, the tech titan has posted back-to-back bottom-line misses in its previous two prints.

Amazon also has a respectable earnings track record, with six EPS beats over its last ten quarters. Like Alphabet, however, AMZN has most recently posted back-to-back EPS misses.

While Amazon shares have been stronger year-to-date, Google’s seven EPS beats over its last ten prints slightly edge out Amazon’s six bottom-line beats in the same timeframe.

Valuation & Growth Estimates

Pivoting to valuation, both Alphabet and Amazon currently carry a Value Style Score of a C. In addition, both companies’ forward price-to-sales ratios are well beneath their five-year medians.

Still, Amazon’s 2.5X forward P/S ratio is much cheaper than Alphabet’s 5.7X.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Both companies also carry a Growth Style Score of a B.

In FY22, Amazon’s earnings are forecasted to decline by a staggering 93%, but revenue is forecasted to climb 11.5%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Pivoting to Alphabet’s growth profile, the tech titan’s earnings are forecasted to drop 7% in FY22, paired with forecasted Y/Y revenue growth of 11.8%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Amazon shares are currently cheaper, but Google looks like it has the upper hand in growth.

Bottom Line

It’s hard to choose between these two titans, as they’ve fully established themselves in the market and have provided investors with unbelievable gains over the last several years.

Earlier in the year, both companies performed a stock split, making shares accessible to all investors.

Amazon AMZN has enjoyed a stronger share performance and has cheaper shares. Meanwhile, Alphabet GOOGL has a slightly stronger earnings track record and a visibly better growth trajectory.

In addition, both companies carry a Zacks Rank #3 (Hold).

With the adverse economic situation we currently find ourselves in, it looks better for investors to deploy a defense-first approach and wait until one of the two starts seeing favorable earnings estimate revisions.


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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
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