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Bernstein maintains Market Perform rating on Alphabet shares amid DOJ actions

Published 09/10/2024, 12:48
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Bernstein has reiterated a Market Perform rating on shares of Alphabet (NASDAQ: NASDAQ:GOOGL) with a price target of $180.00.

The stance comes after the Department of Justice (DOJ) filed a preliminary remedy proposal on Tuesday night against Google Search. Bernstein's analysis finds that the DOJ's initial framework is extensive but lacks detailed specifications.

The firm anticipates the DOJ to file its final proposed remedies by November 20, 2024.

In response to the DOJ's filing, Google issued a strong rebuttal, arguing that the DOJ's proposals are an overreach and could lead to serious unintended consequences. Bernstein has previously discussed and agrees with several points in Google's counterarguments.

The DOJ's proposed remedies encompass four areas: search distribution, data usage, search adjacencies, and advertiser monetization. Notably, the remedies include implications for artificial intelligence (AI) across all categories.

The DOJ's initial framework is seen as just the beginning of what is expected to be a protracted legal battle. The final proposed remedies are still pending and are likely to provide more concrete details on the DOJ's intentions. The impact of these remedies on Google's operations, particularly in the realm of AI, is being closely monitored by industry observers.

In other recent news, analysts at Cantor Fitzgerald have maintained a neutral rating on Alphabet, anticipating strong third-quarter performance with revenues expected to meet and earnings per share to exceed consensus estimates.

Legal challenges, however, continue to loom over Alphabet as the U.S. Department of Justice (DOJ) considers significant actions against Google, including the dissolution of exclusive contracts deemed anti-competitive, following a court ruling that found Google had established an illegal monopoly in the online search market.

In response to these antitrust concerns, the DOJ is set to propose measures to enhance competition in online search services, which may include drastic actions such as breaking up the tech giant. Alphabet's Google, however, plans to appeal the decision, arguing that its search engine's dominance is due to the quality of its service.

On a different note, Alphabet's Google has also expanded its strategic partnership with Vodafone (NASDAQ:VOD) in a ten-year agreement valued at over a billion dollars. This agreement aims to introduce Google's latest generative AI-powered devices to Vodafone's customer base throughout Europe and Africa.

InvestingPro Insights

As Alphabet (NASDAQ:GOOGL) navigates regulatory challenges, InvestingPro data offers valuable context for investors. Despite the DOJ's proposed remedies, Alphabet maintains a strong financial position with a market capitalization of $2.03 trillion. The company's P/E ratio of 23.4 suggests a reasonable valuation considering its market dominance and growth prospects.

InvestingPro Tips highlight Alphabet's financial strength, noting that it "holds more cash than debt on its balance sheet" and "cash flows can sufficiently cover interest payments." These factors could provide a buffer as the company faces potential regulatory headwinds.

Moreover, Alphabet's revenue growth of 13.38% over the last twelve months demonstrates its continued ability to expand despite regulatory scrutiny. This aligns with another InvestingPro Tip indicating that Alphabet is "trading at a low P/E ratio relative to near-term earnings growth," which could be attractive to value-oriented investors.

For those seeking a deeper understanding of Alphabet's position, InvestingPro offers 8 additional tips, providing a comprehensive view of the company's strengths and challenges in this evolving regulatory landscape.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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