The federal government is a long way from actually breaking Google up. Investors are starting to treat the possibility as a foregone conclusion.
The trial for the Justice Department’s second antitrust case against the internet titan started Monday. That comes a month after Google lost the first case, with a federal judge ruling that the company engaged in illegal practices to maintain its dominance in internet search. The current trial challenges Google’s position in the ad-tech industry, where the company’s tools play a major role in the buying and selling of online advertising.
The first case could result in an order to separate the search business from the company’s Android and Chrome platforms. In the second case, the government is seeking an order that would force Google to divest itself of its ad-tech services.
Threats of government crackdowns have swirled around Google and its big tech peers for years now. That has done little to dent their business momentum or appeal to investors; the combined market capitalizations of Apple, Microsoft, Amazon, Google-parent Alphabet and Facebook-parent Meta Platforms totaled a little over $12 trillion by the end of June—up 146% from the beginning of 2020. That is more than double the S&P 500’s performance in that time.
But Google’s parent has recently broken from that pack. Alphabet’s stock is down nearly 14% since the start of the current quarter—a notable drop even against other major tech stocks that have slipped in that time due to market rotation dynamics and growing worries about artificial intelligence investments .
Microsoft and Amazon, Google’s closest peers in AI and cloud computing, have seen their share prices slip nearly 4% each this quarter. And at around 19 times forward earnings, Alphabet is also the only megacap tech stock trading at a discount to the S&P 500 on that measure, according to FactSet data. Apple, Microsoft, Amazon, Meta and AI chip titan Nvidia average 31 times projected earnings.
Wall Street is still relatively positive on Google; 78% of analysts rate Alphabet’s stock as a buy, according to FactSet. But among analysts, there has been a notable shift in tone lately about the company’s regulatory challenges.
« At the margin, we are more cautious on Google’s shares, » wrote Mark Mahaney of Evercore ISI in a report Monday, projecting « significant uncertainty » for the next 12 months. Mark Shmulik of Bernstein wrote earlier this month that « it’s hard to envision Google escaping the battles unscathed. »
The stakes in the two cases aren’t exactly equal. The ad-tech lawsuit targets a business that produced about $20 billion in revenue in 2020, according to filings in the case—about 11% of Alphabet’s total revenue that year. But nearly three-quarters of that was shared with Google’s partners in the form of traffic acquisition costs, making it a far less profitable business than the company’s core search offering.
Justin Patterson of KeyBanc Capital estimates a full divestiture of ad-tech would knock only 1% to 2% off Alphabet’s project per-share earnings in 2025. Still, Patterson says Google wields « disproportionate market share » in this business. « We believe this is a difficult trial for Google to win, » he wrote in a Sept. 9 report.
The search case is potentially more damaging . Google has long paid Apple billions of dollars a year to be the default search option on Apple’s mobile devices. The ruling last month found that deal and other similar ones have limited competition in the search marketplace, where Google has long maintained a global share of more than 90%, according to Statcounter. Among the penalties the government reportedly is seeking is forcing Google to divest itself of its Android mobile operating system and Chrome browser.
Most analysts doubt that outcome, given that neither really work as stand-alone businesses. But other penalties are possible, such as banning Google from paying companies like Apple for preferred search placement, which could open the door for competitors like Microsoft’s Bing engine to secure those slots. « We believe the status quo is no longer possible, and we expect the judge to decide on a remedy that will be punitive for Google, » wrote Doug Anmuth of JP Morgan in a Sept. 3 report.
But any outcome in the search lawsuit won’t be clear for some time, as the judge presiding over that case doesn’t plan to issue a ruling on the remedies until next August. And Google will almost certainly appeal any adverse ruling, which could tie up the matter for at least another year beyond. That gives the company plenty of time to strengthen its businesses and plan for multiple outcomes, but that could also mean a long overhang for the stock. The only certainty for Google at this point is that nothing is going to be certain for a long while.
jpnc97 on
I aint reading all that. Sounds like calls
Suitable-Gas-7979 on
Leaps are free money and good return. Short term… idk.
HossBonaventure__CEO on
Fuckin bullish af long term baby 800 shares locked and locked.
Altruistic_Income_48 on
Oh no, Google going through a breakup?Must be tough for Alphabet soup!Hopefully, they can still search for a new partner.Maybe it’s time for a fresh start with a new Page in their life.
Desmater on
My opinion is if this was before 2020, maybe.
But now a days Amazon, Walmart, Netflix/streamers, etc are all having advertising businesses.
Also if AI/ChatGPT is disrupting search, how does Alphabet have a monopoly anymore.
Also META has been around a long time and their business is advertising and growing.
strictlyPr1mal on
I swear I can feel my brain cells atrophy the more time I spend on this blasted website
PharmDinvestor on
Google will not be broken up
Illustrious_Pop8860 on
I ain’t buying that shit. But I won’t buy calls I’ll just buy the dipped shares.
Ok-Run-8643 on
just take a look a the list of the top 15 lobby list . google is on there. nothing will happen . If happens is because google want it .
MrMage on
If anything, they’ll get some fines and maybe some
Behavior mods. I wish they were broken up. Unlocks value.
ChiefTestPilot87 on
Breakup soon to be in the form of companies named A, B, C, D…. You get the idea
Infinityand1089 on
If they just communicate openly and honestly, I’m sure Google will be able to work it out.
ExtremelyBigYikes on
Holding ITM $130 Jan calls rn— Google isn’t going anywhere
FalseListen on
A breakup will only increase its value IMO
Fawkinchit on
What search engine will replace Google though???
agoldprospector on
IMO Google would do well to break itself up. Search is going downhill soon when AI bites in. The way we consume ads is going to change. Wokism is fading. Their old core business and the people that run it are outdated.
Split the old chaff off the AI/chip business and run it lean and mean. If I heard that happening, I might go all in on Google honestly.
The justice department would be doing them a favor breaking them up. If that’s what is priced in and it’s gone down as a result, the market has misunderstood the situation and there is money to be made.
Pitiful_Difficulty_3 on
I will buy some shares. Price could be flat to ruin calls
RBAnger on
The thing to ask is “why invest in goog”
Like, the stock doesn’t go up just because its down. It gets undervalued, people THINK it will go up, and so invest. But it still really requires evidence of greatness going forward to hit bigger PE ratios than it has been and really catch up to the rest of FAANG
Given that GOOG is one of the only big tech companies that loses market space to generative AI, I’ m not optimistic.
19 Comments
The federal government is a long way from actually breaking Google up. Investors are starting to treat the possibility as a foregone conclusion.
The trial for the Justice Department’s second antitrust case against the internet titan started Monday. That comes a month after Google lost the first case, with a federal judge ruling that the company engaged in illegal practices to maintain its dominance in internet search. The current trial challenges Google’s position in the ad-tech industry, where the company’s tools play a major role in the buying and selling of online advertising.
The first case could result in an order to separate the search business from the company’s Android and Chrome platforms. In the second case, the government is seeking an order that would force Google to divest itself of its ad-tech services.
Threats of government crackdowns have swirled around Google and its big tech peers for years now. That has done little to dent their business momentum or appeal to investors; the combined market capitalizations of Apple, Microsoft, Amazon, Google-parent Alphabet and Facebook-parent Meta Platforms totaled a little over $12 trillion by the end of June—up 146% from the beginning of 2020. That is more than double the S&P 500’s performance in that time.
But Google’s parent has recently broken from that pack. Alphabet’s stock is down nearly 14% since the start of the current quarter—a notable drop even against other major tech stocks that have slipped in that time due to market rotation dynamics and growing worries about artificial intelligence investments .
Microsoft and Amazon, Google’s closest peers in AI and cloud computing, have seen their share prices slip nearly 4% each this quarter. And at around 19 times forward earnings, Alphabet is also the only megacap tech stock trading at a discount to the S&P 500 on that measure, according to FactSet data. Apple, Microsoft, Amazon, Meta and AI chip titan Nvidia average 31 times projected earnings.
Wall Street is still relatively positive on Google; 78% of analysts rate Alphabet’s stock as a buy, according to FactSet. But among analysts, there has been a notable shift in tone lately about the company’s regulatory challenges.
« At the margin, we are more cautious on Google’s shares, » wrote Mark Mahaney of Evercore ISI in a report Monday, projecting « significant uncertainty » for the next 12 months. Mark Shmulik of Bernstein wrote earlier this month that « it’s hard to envision Google escaping the battles unscathed. »
The stakes in the two cases aren’t exactly equal. The ad-tech lawsuit targets a business that produced about $20 billion in revenue in 2020, according to filings in the case—about 11% of Alphabet’s total revenue that year. But nearly three-quarters of that was shared with Google’s partners in the form of traffic acquisition costs, making it a far less profitable business than the company’s core search offering.
Justin Patterson of KeyBanc Capital estimates a full divestiture of ad-tech would knock only 1% to 2% off Alphabet’s project per-share earnings in 2025. Still, Patterson says Google wields « disproportionate market share » in this business. « We believe this is a difficult trial for Google to win, » he wrote in a Sept. 9 report.
The search case is potentially more damaging . Google has long paid Apple billions of dollars a year to be the default search option on Apple’s mobile devices. The ruling last month found that deal and other similar ones have limited competition in the search marketplace, where Google has long maintained a global share of more than 90%, according to Statcounter. Among the penalties the government reportedly is seeking is forcing Google to divest itself of its Android mobile operating system and Chrome browser.
Most analysts doubt that outcome, given that neither really work as stand-alone businesses. But other penalties are possible, such as banning Google from paying companies like Apple for preferred search placement, which could open the door for competitors like Microsoft’s Bing engine to secure those slots. « We believe the status quo is no longer possible, and we expect the judge to decide on a remedy that will be punitive for Google, » wrote Doug Anmuth of JP Morgan in a Sept. 3 report.
But any outcome in the search lawsuit won’t be clear for some time, as the judge presiding over that case doesn’t plan to issue a ruling on the remedies until next August. And Google will almost certainly appeal any adverse ruling, which could tie up the matter for at least another year beyond. That gives the company plenty of time to strengthen its businesses and plan for multiple outcomes, but that could also mean a long overhang for the stock. The only certainty for Google at this point is that nothing is going to be certain for a long while.
I aint reading all that. Sounds like calls
Leaps are free money and good return. Short term… idk.
Fuckin bullish af long term baby 800 shares locked and locked.
Oh no, Google going through a breakup?Must be tough for Alphabet soup!Hopefully, they can still search for a new partner.Maybe it’s time for a fresh start with a new Page in their life.
My opinion is if this was before 2020, maybe.
But now a days Amazon, Walmart, Netflix/streamers, etc are all having advertising businesses.
Also if AI/ChatGPT is disrupting search, how does Alphabet have a monopoly anymore.
Also META has been around a long time and their business is advertising and growing.
I swear I can feel my brain cells atrophy the more time I spend on this blasted website
Google will not be broken up
I ain’t buying that shit. But I won’t buy calls I’ll just buy the dipped shares.
just take a look a the list of the top 15 lobby list . google is on there. nothing will happen . If happens is because google want it .
If anything, they’ll get some fines and maybe some
Behavior mods. I wish they were broken up. Unlocks value.
Breakup soon to be in the form of companies named A, B, C, D…. You get the idea
If they just communicate openly and honestly, I’m sure Google will be able to work it out.
Holding ITM $130 Jan calls rn— Google isn’t going anywhere
A breakup will only increase its value IMO
What search engine will replace Google though???
IMO Google would do well to break itself up. Search is going downhill soon when AI bites in. The way we consume ads is going to change. Wokism is fading. Their old core business and the people that run it are outdated.
Split the old chaff off the AI/chip business and run it lean and mean. If I heard that happening, I might go all in on Google honestly.
The justice department would be doing them a favor breaking them up. If that’s what is priced in and it’s gone down as a result, the market has misunderstood the situation and there is money to be made.
I will buy some shares. Price could be flat to ruin calls
The thing to ask is “why invest in goog”
Like, the stock doesn’t go up just because its down. It gets undervalued, people THINK it will go up, and so invest. But it still really requires evidence of greatness going forward to hit bigger PE ratios than it has been and really catch up to the rest of FAANG
Given that GOOG is one of the only big tech companies that loses market space to generative AI, I’ m not optimistic.