MW Alphabet's stock slides as Feds push for Chrome sale. Why fears are overblown.
By Tomi Kilgore and Emily Bary
The Google parent's stock is heading for its worst day in 10 months. But one analyst thinks a forced Chrome sale seems unlikely.
Shares of Alphabet Inc. dropped 5.4% in morning trading, enough to pace the S&P 500 index's decliners, after the U.S. Department of Justice filed a document proposing a breakup of technology giant's Google search business.
The stock's $(GOOGL)$ $(GOOG)$ selloff was on track to be the biggest since the 7.5% selloff on Jan. 31.
But investors perhaps shouldn't fear the most draconian scenario, according to one analyst. Baird's Colin Sebastian doubts that most of the DOJ's requests will gain approval from the courts or make it through an appeals process.
"Beyond the reasonable ask to prohibit search distribution agreements, the DOJ remedies are, in our view, a wish-list of restrictions on Google that stray well beyond the court's ruling," Sebastian wrote in a note to clients Thursday.
Opinion: Google may face demand to spin off Chrome in antitrust case. But will it actually happen?
In documents filed late Wednesday, the DOJ urged a federal judge to push Google to sell its Chrome browser and force its Android smartphone software to stop favoring the Google search engine, as the Associated Press reported. The DOJ's plan was first reported on Monday by Bloomberg.
Prior to Thursday's selloff, the stock had gained 2% since that report through Wednesday, as an actual sale of Chrome was viewed by many as unlikely. It was also uncertain if an incoming Trump administration would continue to push for the sale.
"We don't expect the court to force Google to sell off Chrome, since this seems very punitive compared to simply prompting users to pick their default search engine," Sebastian wrote. "Perhaps the DOJ requested this action, since user choice in Europe has not meaningfully impacted Google's search share."
See also: Google loses massive antitrust case over its search dominance
As for the Trump wild-card aspect, there are admittedly some quirks to Google's situation. Investors generally expect the Trump administration to be more friendly to companies from a regulatory perspective. But Sebastian flagged that the original lawsuit against Alphabet came during Trump's first term, and he's made comments since then that were critical of the company.
"More recently, Trump called Google search 'rigged,' and [said] that he 'would do something' about Google, including pursuing 'criminal prosecution' for showing 'bad stories' about him; note that Trump changed his position on TikTok over the summer, so it's not clear where he currently stands on the DOJ recommendations," Sebastian wrote.
MoffettNathanson analysts, meanwhile, highlighted that nothing about the case is expected to be in any way immediate.
"If the DOJ's remedy framework from last month was broad, expansive, but also vague, this proposal swaps vague for highly pointed," they said. "But the entire purpose of this remedy phase is for the court to poke and prod the proposal. Google will have an opportunity to present its view. Under any circumstances we are still multiple appeals and many years away from anything being finalized."
Alphabet's stock has rallied 19.2% year to date, while the S&P 500 SPX has climbed 23.8%.
-Tomi Kilgore -Emily Bary
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November 21, 2024 10:43 ET (15:43 GMT)
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