Alphabet’s Stock Set For New High On Open, As Antitrust Case Leaves Chrome Untouched

Alphabet's stock (GOOGL) is poised to open significantly higher following a favorable ruling in the Justice Department's landmark antitrust case. The court's decision, which allows Google to maintain its core business practices under modified guidelines, has triggered a wave of positive sentiment, setting the stage for a substantial opening gain.

Markets reacted positively to the news, with Alphabet's stock price trading 5.75% higher in pre-market activity, indicating an opening price around $223. This surge reflects a collective sigh of relief among investors who had been bracing for potentially more disruptive remedies, such as the forced divestiture of the Chrome browser.

The decision to allow Google to continue paying distributors for default placement, albeit under annual, non-exclusive agreements, has further buoyed market confidence.

Bank of America analyst Wamsi Mohan raised the firm's price target on Apple (AAPL) to $260 from $250, maintaining a Buy rating, citing the ruling as a “win” for Apple. The ability for Google to continue payments for default search placement, including to Apple, was a key factor in this increased confidence. Evercore ISI analyst Mark Mahaney described the ruling as a “best case scenario” for Alphabet, reiterating an Outperform rating with a $240 price target, removing Alphabet from the firm's “Tactical Outperform” list.

The U.S. District Court’s ruling determined that while Google held an illegal monopoly in the search market, structural remedies like the separation of Chrome or Android were not necessary. Instead, Judge Amit Mehta mandated data-sharing with rivals and prohibited exclusive agreements that would prevent device manufacturers from pre-installing competing products. This balanced approach, which seeks to foster competition without fundamentally altering Google's business structure, appears to have resonated well with markets.

The core of the ruling revolves around Google's dominance in the search market and the remedies required to address anti-competitive practices. While the company is barred from exclusive contracts for search distribution, it can still pay for default placement on an annual basis. Additionally, Google must share certain search data with competitors, a move aimed at levelling the playing field and encouraging innovation. The avoidance of structural remedies, initially sought by the Justice Department, is viewed as a major victory for Alphabet.

The implications of this ruling extend beyond Alphabet, impacting its key partners like Apple. The assurance of continued revenue streams from Google's default placement payments provides stability and supports Apple's Services growth. For Alphabet, the ruling removes a significant overhang of uncertainty, allowing the company to focus on its core business and strategic initiatives.