Wedbush noted that a federal judge’s ruling in an antitrust case brought by the U.S. Department of Justice was a “massive win” for Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL).
Judge Amit Mehta ruled that Google must open up competition in online search by sharing more data with competitors, and said that the company could not enter exclusive contracts for search but could still pay for search engine inclusion.
Shares of Google jumped about 5%, while Apple’s stock climbed nearly 3% premarket on Wednesday.
“Google and Apple just got a massive win from the courts ruling that the ongoing $20 billion search deal between the two stalwarts will remain and not be barred in its current form. This was a black cloud worry over Apple’s stock as investors worried a Google Chrome breakup and/or forced to extinguish the search deal with Apple was potentially on the docket,” said analysts led by Daniel Ives.
The analysts added that this “is a monster win for Cupertino and for Google its a home run ruling that removes a huge overhang on the stock.”
The analysts noted that in theory Google is barred from “exclusive deals” for search but this now lays the groundwork for Apple to continue its deal and ultimately likely double down on more AI related partnerships with Google’s Gemini down the road.
Ives and his team said that there will be some tweaks to the partnership, but ultimately this “removes a $25 overhang on Apple’s stock in our view that the Street will digest very bullish asthis ruling now is finally in the books after years of speculation.”
Wedbush maintained its Outperform rating and $270 price target on Apple’s stock.
Commentary on Google
Wedbush kept its Outperform rating but raised the price target on the stock to $245.00 from $225.
The analysts noted that Google will not be required to divest Chrome, and may continue to enter agreements with distribution partners for the preloading or placement of its products.
“The outcome is broadly favorable for Google, in our view, with the court ruling againstthe most severe remedy proposals introduced by the DOJ [Department of Justice],” said Ives and his team.
The analysts believe there is a compelling case for multiple expansion in the coming quarters and the discount relative to peers is unwarranted, given — the judge’s decision removes lingering risks associated with a potential worst-case regulatory outcome for Google; concerns around the impact of genAI on the business are fading, with Alphabet validating its ability to navigate this period of transition; and management is repositioning the business as a winner in the AI space, with strong demand trends and an acceleration in Cloud growth.
“We think focus will now shift towards the positioning of GOOGL relative to megacap peers, and we highlight that shares have continued to trade for a discount versus META (META). Following today’s announcement, we are increasingly constructive in the longer-term durability ofGoogle’s Search business and are raising our estimates accordingly,” said the analysts.