Alphabet, the experts have their say: how and why the antitrust risk is weighing on the share price

Up to this point, some suggestions on two events which, in the last month, have influenced the dynamics of Alphabet on Wall Strett (especially the first one). There is, however, another fact that - recalled by newspapers all over the world - must be remembered: the judgement of the US federal judge Amit P. Mehta who, last 5 August, condemned Alphabet. "Google is a monopolist and has acted as such in order to maintain its monopoly," the magistrate wrote in the ruling. A 300-page-long decision in which Mehta states that the big 'G', owned by Alphabet itself, maintained a monopoly in two markets: general search services and text advertising, using exclusive distribution agreements with browser developers, smartphone manufacturers and mobile phone operators. The company, of course, reacted to the decision and said it would appeal. 'People are searching for information in more and more ways,' the company indicated, 'we plan to appeal. While this process continues, we will continue to focus on making products that people find useful and easy to use'.

Beyond future skirmishes, what interests the saver is to understand what the concrete impact of such a decision might be on Alphabet's business. As things stand," the experts remind us, "the judge must urge the parties to come up with solutions to eliminate the problem. On this front, Bloomberg and the New York Times have published rumours concerning the Department of Justice (DoJ). Hypothetically, the most diverse scenarios would be on the table: from the extreme to the soft. Thus, again according to the two media reports, the DoJ offices would have discussed, for instance, forcing Alphabet to disinvest from the Android operating system; or the separation from the Google Ads platform. Clearly, these are very harsh hypotheses for the company. 'The risk,' Calef resumes, 'of a split between Chrome and Android, for example, is real'. The discussion about the split 'is linked to the concern that Alphabet will use these two platforms to strengthen its grip on the mobile market'. Much more accommodating, on the other hand, would be the path of - among other things - requiring the big 'G' to surrender or license its data to rivals, such as Microsoft's Bing.

That being said, a first basic assessment - confirmed by the same trend on the stock market where, after an initial slide - the stock has recovered - is that the experts do not believe too much in either an immediate solution or the break-up hypothesis. 'The lawsuit, in the face of the company's opposition,' writes Dan Ives of Wedbush in a note, 'will drag on for years. "Not only that," Bertelé adds, "it must be stressed that the issue is also political. Meaning: 'The Biden administration has taken a rather hard-line approach towards big tech'. Just think of the appointment of Lina M. Khan - intransigent with respect to possible monopolist positions - 'as chairman of the Federal Trade Commission'. It was one of the moves that contributed to creating in America 'a context in which regulations, not adapted to the new technologies, have been subjected to even extensive interpretations. Assessments that - together with a public opinion that is not in favour of the technological giants - have led to rulings such as that of 5 August'. Now, however, we have to wait for the next occupant of the White House. 'With Kamala Harris, there may be no solution of continuity'. 'And yet,' De Luca reiterates, 'the danger, especially with respect to the most extreme hypotheses, does not seem concrete. The DoJ, in the past, has envisaged multiple corporate separations. But these, in the end, were not - as in the case of Microsoft in the 1990s - completed'. Ultimately then, considering the Chinese technological challenge itself, scepticism about a strong intervention in Alphabet prevails. Time - always the gentleman - will tell whether the assessment is correct. Having said that, however, the do-it-yourselfer must, thinking that a move by the DoJ is now possible in any case, use great caution with respect to the stock.

That share which, with regard to fundamentals and according to Seeking Alpha, boasts, on the one hand, a non-GAAP P/E on 2024 of 22.11 (13.28 the median of the price/earnings ratio for the reference sector); and, on the other, a non-GAAP PEG (always prospective) of 1.27 (1.4, instead, the indicator for the sector). Eps for the full year to date, finally, is indicated by the consensus - reported by Seeking Alpha - at $1.83. That is to say, a figure that would be 18.2% higher than last year's actual.

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