Google may face a breakup, how do Wall Street analysts view it?
Google's parent company Alphabet faces pressure to split up, especially after the antitrust ruling on search engine monopolies, although analysts believe this may take several years or may not happen at all. Analysts point out that the U.S. Department of Justice's antitrust actions may be lengthy, so it is unlikely to have an impact on Google's recent business in the near term. In addition, historical cases show that similar legal processes often take a long time
According to CNBC, the stock price of Alphabet (GOOGL.US), the parent company of Google, fell on Wednesday. Reports on Tuesday indicated that the U.S. Department of Justice, after winning an antitrust case, is considering pushing for the breakup of this tech giant. Last week, Google lost a landmark antitrust case involving its search engine monopoly and contracts that forced partners to use Google as the default search engine, marking the largest competition case of its kind in 20 years. The company is still facing another antitrust case related to its advertising technology, scheduled to begin in September. However, analysts are skeptical about the push for a breakup, believing that such action is unlikely to happen quickly, if at all.
Wedbush pointed out that the potential breakup of Google could be "difficult and prolonged" as Google is likely to appeal these rulings easily, leading to a lengthy legal process. Analyst Dan Ives wrote, "Over the past few years, with the arrival of the artificial intelligence revolution, the strong have become stronger among large tech companies. While the European Union has been chasing large tech companies for the past decade, the European Commission has only achieved some minor victories. But Wall Street's bigger concern is that the U.S. Department of Justice has finally gained some traction in the power struggle with large tech companies. Last week's victory was a huge win for the U.S. Department of Justice, and now companies like Apple (AAPL.US), Amazon (AMZN.US), Meta (META.US) will be in focus. We still believe that the breakup of large tech companies' business models is highly unlikely in the future, although adjustments to business models and stricter scrutiny of mergers will be the primary and core issues."
Wedbush believes that the Department of Justice's antitrust actions may take "several quarters or even years" to yield final results, and it expects Google's near-term business to remain unaffected.
BMO analysts studied the 1998 Microsoft (MSFT.US) antitrust case, in which the software giant was accused of monopolistic behavior. The institution noted that it took six years from filing the lawsuit to approval and settlement. Analyst Brian Pitz stated, "The outcome is uncertain, but we believe that the simultaneous occurrence of these two events may put pressure on Google's stock price in the short term. We still view Google as a leader in the field of artificial intelligence in the medium to long term, although we recognize that recent trial risks may be significant."
While BMO has become increasingly cautious about Google's stock recently, it still maintains an "outperform" rating