On October 8, the U.S. Department of Justice released its remedy framework for the Google Search v. Alphabet antitrust case GOOGL/GOOGwhich included a series of structural, contractual and data-related repairs. The final proposal will be filed on November 20, but this filing gives a taste of what is to come.
Why it matters: This is arguably the most important antitrust case of the three facing Alphabet. The corrective measures could potentially affect Alphabet’s search engine, Google Search. As part of its framework of remedial measures, the Justice Department included the divestiture of Chrome and Android, a highly unlikely outcome. We remind investors that to impose a breakup, the DOJ must prove that other remedies will not work on their own. Beyond a breakup, we believe there will likely be restrictions on Alphabet’s exclusive deals with companies like Apple AAPL and Samsung, both in the DOJ’s proposal and in the judge’s eventual ruling. US District Amit Mehta. We do not believe that this outcome is materially destructive of value for Alphabet.
The result: We maintain our fair value estimate of $209 per share for Alphabet and continue to view the company as well-positioned to weather antitrust headwinds. Although there is headline risk, as evidenced by the recent release and subsequent share price action, we believe investors can buy Alphabet at an attractive price.
The big picture: Even as the antitrust case looms, we ask investors to consider Alphabet’s strengths as a global business, with the company well positioned in many markets, including advertising, video, public cloud and AI generative. We continue to welcome the company’s efforts to diversify away from search-based advertising. In particular, we believe its investments in Google Cloud will drive value as interest in AI accelerates public cloud spending.
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