JMP Securities believes that the recent decline in Alphabet's (NASDAQ:GOOGL) stock price has fully accounted for the potential impact of antitrust penalties.
With shares down 18% from their July highs, analysts say, "The market has fully factored in the risk of an adverse antitrust penalty that limits Google's ability to bid on default search placements."
According to JMP, an antitrust penalty limiting Google's bidding for search placements could pose a $1.23 per share hit to Alphabet's earnings per share (EPS), which equates to 12% of the consensus EPS estimate of $10.08 for 2026.
Despite this, JMP remains optimistic about Alphabet's ability to mitigate the impact, noting that the company could leverage advertising, push notifications, and cost adjustments to offset the potential losses.
"Our analysis does not capture Alphabet's reaction, making it conservative," analysts wrote, indicating that the company's adaptive strategies could lessen the financial blow.
JMP also highlighted several positive factors for Alphabet, including the growth of search demand driven by artificial intelligence (AI), derisked YouTube estimates, healthy cloud demand bolstered by AI, and ongoing cost efficiencies.
With these drivers in mind, analysts remain positive on Alphabet shares, particularly after the recent pullback. "We continue to recommend shares, especially given the recent pull back as we believe it more than accounts for the potential impact to EPS," the firm adds, maintaining a Market Outperform rating and $200 price target on the stock.
They add that if the $1.23 EPS hit materializes, the price target would still stand at $173 based on a 24x multiple of 2025 EPS.
At its most recent closing price of $157.46, Alphabet is trading at about 19x JMP's 2025 EPS estimate of $8.35, well below the firm's $200 target. JMP remains confident in Alphabet's vast total addressable market (TAM) and profitability across search, video, and cloud segments.