Gene Munster Has Two Reasons Why Google's Reorganization Is Good For Shareholders

Google Inc GOOG GOOGL's stock opened higher on Tuesday following the company's announcement on Monday that it will be reorganizing its business under a holding company Alphabet Inc.

Piper Jaffray's Gene Munster was on CNBC to weigh in on this reorganization and how this will benefit the company.

2 Benefits

"First, it offers transparency and investors love transparency," Munster began. "And I think what they are going to find with this is that their core search business is more profitable than what people thought. We think it's probably about 10 percent more profitable. So, for a company that doesn't give a lot out, just transparency is good."

He continued, "Second and more sustaining, is just a whole new structure which really benefits a company like Google, which is more than just search. It has a lot of other projects which people talk about. But giving them the proper management to really go after these I think is going to be good for some of these other what they call moonshot businesses. So, it's good for those two reasons."

Longer Positive Impact On The Stock

Munster was asked what will be the impact of this move by Google on its stock. He replied, "It probably should get in total maybe a five to 10 percent lift because of this 10 percent of greater profitability with Google search, which is about 90 percent of their business."

"So, I think that that's probably the near term. But more importantly the longer term, I think it gives investors a sense that all these projects that they don't know a lot about are in better hands and better focus and that should provide a better opportunity for some of these projects to be more sustainable to the overall business. That has a longer positive impact on the stock," Munster said.