Thanks to mounting legal pressure in the United States and China, DA Davidson’s Gil Luria gave Alphabet (NASDAQ: GOOGL) stock an unorthodox and conditional price target on May 13.
According to Luria, the technology giant is being held back by its mere existence, and its shareholders could enjoy significant returns should a breakup be implemented.
Despite agreeing with the overall sentiment toward Google, the expert disagrees with the Department of Justice’s (DoJ) ‘isolated spinoffs’ suggestion, and is advocating for what he calls a ‘big bang breakup:’
Everybody knows that the best thing for Google is to break it up, except for Google.
Should such a solution be implemented, Gil Luria believes that Alphabet shares would effectively be valued between $240 and $300, up to 81.82% above GOOGL stock’s press time price of $165.29.
By extension, the company’s market capitalization as a series of entities would amount to $3.6 trillion instead of the actual May 15 valuation of $2 trillion.
Why Google shareholders would benefit from a breakup
Out of the six likely companies spawned from the hypothetical breakup—Search, Cloud, TPU, Deepmind, YouTube, Network, and Waymo—Google Search would likely be the biggest at just over $1 trillion, and the autonomous driving car company Waymo would be the smallest at approximately $181 billion.
The crux of Luria’s argument is that Google trades at just 16 times its forward earnings, while he believes that the technology giant’s artificial intelligence (AI) successor firms could swiftly hit a 23 multiple.
Why Google might become better if it is broken up
Should the company be divided, Google’s users and customers, along with shareholders, might also see significant benefits.
A series of lawsuits targeting the technology titan over its alleged monopolistic position and tendencies, as well as the DoJ’s April victory, served as an enticing incentive for Luria’s proposal.
Through extensive court documentation, they also showcased that Google has been deliberately degrading the quality of organic searches to force users to spend more time looking at the results and, by extension, the increasingly prevalent advertisements.
The segment describing the strategy was pinpointed by Peter Wildeford, a prominent forecaster on X, who highlighted that the approach was possible because Alphabet had no competition.
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