Alphabet’s (GOOGL) Google is in the hot seat after a U.S. federal judge ruled that it illegally dominates the digital advertising market. As the tech giant braces for a possible breakup of its ad business, analysts remain cautiously optimistic, noting that the ruling could have far-reaching consequences for Alphabet’s core revenue engine.
What’s Next for Google?
The decision is expected to trigger a lengthy and costly appeals process that may reverse some of Judge Leonie Brinkema’s findings. Still, for now, it marks a major blow to Google’s business. The next step will be another trial to decide how Google should fix the problem, possibly by selling some of its ad tools. That trial hasn’t been scheduled yet.
Analysts Weigh In on Google’s Antitrust Blow
Four-star-rated analyst Gil Luria at D.A. Davidson stated that the U.S. Department of Justice (DoJ) is pushing hard to break up Google’s monopolies and doesn’t seem likely to back down. Luria added that it might be smarter for Google to take the lead and separate some of its businesses, like its ad network, Chrome, or Android, to address these concerns. Luria believes that if Google splits up, it could increase the overall value for shareholders since the combined worth of its businesses is likely much higher than its current stock price. Currently, Luria has a Hold rating on GOOGL stock.
Likewise, Citi suggests that while it may take time for appeals to finish, Google could eventually spin off its ad network. Notably, Citi estimates Google’s advertising network will make up 8% of gross revenue in 2025.
Meanwhile, BMO Capital’s top-rated analyst, Brian Pitz, has reduced the price target for GOOGL stock to $200 from $230, citing an uncertain outlook for the advertising revenue. Pitz kept his Buy rating on GOOGL stock.
Is Google a Buy, Sell, or Hold?
Overall, on Wall Street, analysts have a Moderate Buy consensus rating on GOOGL stock based on 27 Buys and 10 Holds assigned in the past three months. The average GOOGL price target of $197.45 per share implies a 31% upside potential.
