"The weight of uncertainty has been lifted": how the Google case ruling will affect him and Apple

Wall Street analysts saw the ruling in the antitrust case against Google as a victory for the company rather than a defeat. It managed to avoid the worst-case scenario with the split, which had been weighing on quotes throughout the five-year trial. At least five Wall Street analysts raised their price targets on Alphabet shares after the court ruling, noting that the decision removes risks and opens the way for growth in the AI and cloud services business.

For Apple, the outcome of the case was also a win-win: the company will continue to receive about $20 billion a year from Google for its status as the default search engine in its products. The "black cloud" against it has dissipated, Wedbush said.

Wall Street called the court's ruling on Google "innocuous" and noted that it finally removed a "significant weight of uncertainty" from the quotes of its parent company Alphabet, writes Business Insider.

It won't have to sell the $100 billion Chrome browser, which plays an important role in advertising revenue. In addition, Google will be able to continue to pay Apple about $20 billion a year for the default search engine status of Safari and Siri.

- Analysts at RBC Capital raised their target price on Alphabet shares from $220 to $260 following the antitrust ruling, suggesting a potential upside of 23% relative to the last close. "The judge's decision was mainly about opening up parts of Google's search technology to competitors rather than undermining its distribution system (e.g., through the sale of Chrome), which we think would be a much more negative risk. The [company's] path to earnings growth and expanding multiples hasn't looked this clear in a long time," RBC analysts led by Brad Erickson wrote in their review.

- Wedbush analysts titled their note: "Government folded like a cheap suit." They, too, raised the target on Alphabet shares - from $225 to $245, this forecast implies a 16% rise in price. Wedbush cited three reasons to be positive on these securities, which the investment firm believes are undervalued compared to other tech giants such as Meta. First, the court ruling removed the "lingering risks" associated with a worst-case scenario for Google. Secondly, they said, the influence of competitors in the generative AI space, such as OpenAI and Perplexity, is diminishing. Finally, the analysts added, Google management is "reshaping the business as an AI leader, capitalizing on high demand and accelerating growth in the cloud area."

- Bank of America increased the target price of Alphabet shares from $217 to $252, writes CNBC. This is 19% higher than the quotes at the close of trading on September 2. "Since the likelihood of a forced sale of Chrome initially seemed low, the key takeaway for us is that the decision allows Google to maintain its position in search distribution through payments to partners. Given Google's better monetization of search, we believe most partners will have little incentive to develop their own search services," wrote Justin Post, an analyst at the bank. He cited Google's improving position in AI and search products as an additional driver. Further evidence of Gemini's chatbot progress "could push the stock's multiple to all-time highs," the BofA analyst said.

- JPMorgan improved its target price to $260 from $232, noting that decisions on Google Search's commercial agreements were much more favorable than expected, CNBC quoted a research note as saying. The company will only be prohibited from entering into exclusive contracts involving payments or licensing. Analysts at the investment bank do not foresee a significant impact of these restrictions on the company's finances in the future, "which is a win."

- Barclays raised its target on Alphabet shares from $235 to $250. The bank estimated the impact of the court ruling on market share, revenue or earnings per share as minimal.

- Cantor analyst Deepak Mathivanan acknowledged that "implementing new operating models will take time as Alphabet will likely have to renegotiate distribution agreements with partners without 'exclusivity' clauses. However, and in his view, the financial impact should be immaterial," Barron's quoted the analyst note as saying.

- Goldman Sachs warns that "the extent of the impact of these measures on Alphabet's business is likely to be fully clear only in a few years, and therefore the multiple that investors are willing to pay [for the company's shares] may remain limited for some time to come". Nevertheless, the bank's analysts believe that the current valuation of Alphabet's securities already takes into account the significant risks and sees in the court's decision "an opportunity to reduce the pressure on the multiples associated with the uncertainty of the outcome of the case".

- Wolfe Research, cited by CNBC, estimates that the outcome of the antitrust case will put potential pressure on the company's earnings in the mid-single digit percent range. Analysts suggest that in the medium to long term, Google could cede some market share to competitors in a deal with Apple. On the short horizon, they don't expect a meaningful impact on earnings per share.

- BMO Capital Markets analyst Brian Pitz reminded of possible new challenges for the company: in another antitrust case, Google was found guilty of manipulating the advertising market, and that too allows the Justice Department to seek to divest Google's business. In April, federal Judge Leonie Brinkema in Virginia upheld the government and will hold a hearing in September on whether the company should be required to sell tools used by websites to sell advertising space, Bloomberg writes.

Alphabet shares jumped in extended trading on September 2 immediately after the court ruling. At the pre-market on September 3, they added about 7%. However, even taking into account the revisions of the targets, the Wall Street consensus suggests a growth of about 5% relative to the quotes at the last closing, and it is already lower than the current quotes.

- Allowing Google to continue getting paid for its default search engine status was a win for Apple: the company will continue to receive its annual $20 billion payment, and it will also give it more leverage in future search engine negotiations, Evercore analyst Amit Daryanani wrote, as quoted by MarketWatch. He called it another victory that Google will have to allow "qualified competitors" to use its search results to develop their own products. The move could make Google's search competitors more attractive as search partners for Apple, especially those powered by AI, Daryanani noted. Apple has previously discussed buying AI startup Perplexity, which announced the launch of an AI-enabled web browser. The court ruling also leaves the door open if Apple wants to consider integrating Gemini into its products, MarketWatch writes.

- BofA raised its target price on Apple's stock from $250 to $260 after the court ruling, which corresponds to a potential upside of about 13%. Analyst Vamsi Mohan said the outcome of the case boosted his confidence in Apple's service segment revenue forecasts. "While Google will be prohibited from entering into or maintaining exclusive distribution agreements for Google Search, Chrome, Google Assistant and the Gemini app, for now the company is allowed to pay distributors to pre-install or host these products for one year. In fact, this measure has already been implemented: on Apple devices, Google is the default search engine, but users can change it in settings," he wrote.

- Wedbush analyst Dan Ives noted that a "black cloud of uncertainty" has "dissipated" following the court ruling on Apple stock. "We now see a green light for a larger partnership between Apple and Google on Gemini AI," Ives wrote in a MarketWatch statement .

This article was AI-translated and verified by a human editor