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The verdict on Google’s lengthy lawsuit is out, and analysts say the search giant left the room largely unscathed.
Nearly five years after the Department of Justice filed an antitrust suit against Google, a district judge on Tuesday ruled that Google won’t have to divest its Chrome or YouTube businesses.
Instead, District Judge Amit Mehta’s ruling said that Google will be barred from entering exclusive contracts with partners such as Apple to give its search engine priority, and it will be forced to share some data with rivals.
Google’s stock jumped 6.7% after hours following the decision.
In post-ruling reactions, analysts called the decision “benign” and said that it finally removed a “significant overhang” on Google’s stock.
“The judge’s decision largely surrounded opening up portions of Google’s search technology to competitors rather than trying to disrupt its distribution framework (ie divesting Chrome) which seemed like the more adverse risk to us,” RBC Capital analysts led by Brad Erickson wrote in a note on Tuesday.
“The path for compounding earnings growth along with multiple expansion hasn’t looked this clear in some time,” the RBC analysts added.
RBC raised its price target for the company from $220 to $260 on Tuesday.
Alphabet, Google’s parent company, closed at $212 on Tuesday.
Analysts at Wedbush titled their note, “Government Folds Like Cheap Suit” and wrote: “The outcome is broadly favorable for Google, in our view, with the court ruling against the most severe remedy proposals introduced by the DOJ.”
The Wedbush analysts led by Scott Devitt shared three reasons they are bullish on Google and think its stock is being punished compared to Big Tech peers like Meta.
First, they said that Tuesday’s decision removed “lingering risks” associated with the worst-case outcome for the company. Second, they said that the impact of generative AI rivals such as OpenAI and Perplexity is fading. Lastly, they added that Google’s leadership is “repositioning the business as a winner in the AI space, with strong demand trends and an acceleration in Cloud growth.”
Wedbush raised its stock price target from $225 to $245 on Tuesday.
Google’s stock has risen 11.3% year to date.
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