Google just dodged a massive breakup bullet, and Wall Street’s leaning in quickly.
A federal judge ruled that the tech behemoth could keep Chrome and Android and its lucrative revenue-sharing deals, including Apple’s $20 billion annual pipeline.
However, Google must also default to exclusivity while opening up parts of its search index and accessing its cut-throat competition.
The stakes were massive. Regulators had been floating testing structural remedies over the past several months.
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Needless to say, the implications if it had lost the case were enormous, with Apple’s search deal alone accounting for 4% to 6% of its profits.
After hours, Alphabet (GOOGL) stock soared 7% as breakup risk finally came off the table.
That said, a top Wall Street firm just issued a sharp post-ruling note, while overhauling its price target on Google’s shares. It wasn’t just commentary but more about its positioning. And when they recalibrate, others typically follow.
Google dodges breakup blow as Wedbush hikes target to $245
With Google coming out of the antitrust case mostly unscathed, Wedbush analysts issued a sharp note and raised Google’s price target.
Wedbush analysts titled their note “Government Folds Like Cheap Suit,” while calling the result “broadly favorable for Google”. According to them, the court effectively rejected the most severe DOJ remedies.
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Scott Devitt, who spearheads the internet equity research at Wedbush, highlighted three chief reasons the firm is staying bullish:
- The decision takes the worst-case scenario off the table for Google.
- The competitive impact of AI challengers, including the likes of OpenAI and Perplexity, is fading.
- Google is “repositioning the business as a winner in the AI space”, with healthy demand and fast-growing cloud momentum.
Consequently, Wedbush raised its price target on Google from $225 to $245.
Moreover, Dan Ives, managing director at Wedbush, added on X:
“Huge win for Google in DOJ court ruling and Apple massive search deal survives. Big overhang removed from both Google and Apple.”
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Also, for context, Scott Devitt is a 5-star rated analyst on TipRanks, with a 53% success rate and +12.7% average return per rating, adding solid credibility to his stance.
Gene Munster: Google’s DOJ win lifts Meta, Apple, and even Perplexity
Perhaps the most surprising take on the Google antitrust win comes from veteran tech analyst Gene Munster, who is the managing partner at Deepwater Asset Management. He feels that the win not just boosts Google but its Big Tech peers as well.
Munster told CNBC,
“This is good news, of course, because the regulatory bark is much bigger than the bite. They’re more lenient. That’s positive. It’s positive for Apple, positive for Google, but also positive for Meta”.
He highlighted Apple’s lucrative search deal with Google, which is worth nearly 15% of its operating income, as something that should remain intact.
“I think Apple will still get $20 billion a year from the Google search deal,” he said. Munster also picked Perplexity as a potential victor from mandated data sharing, suggesting Apple might want to consider scooping it up.
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On Google itself, Munster doubled down on its progress in AI-powered search: “Click-through rates with AI overviews and AI mode are basically at the same level that search was at a couple of years ago, which is really impressive.”
That said, other analyst firms also weighed in following the win:
- Oppenheimer (raised price target from $235 to $270): In keeping an Outperform rating, the firm calls the ruling the “best-case outcome,” removing valuation bottlenecks.
- RBC (raised price target from $220 to $260): Besides keeping an Outperform rating, the firm calls the event “benign,” with clearer earnings and multiple expansion potential.
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