Should Alphabet be broken up?
You can catch Opening Bid on Apple Podcasts, Spotify, YouTube, or wherever you get your podcasts. Sometimes a piece of Wall Street research lands in your cluttered inbox that just screams open me! Today, that piece of research comes from D.A. Davidson tech analyst Gil Luria. It’s titled “Time to Break it Up and Unleash Shareholder Value.” The report is on none other than Alphabet (GOOG, GOOGL), which is feeling heat from lawmakers. Recall that last August, US District Judge Amit Mehta found Google liable for illegally monopolizing the general search engine market and the market for general search engine text. Mehta is now tasked with finding ways to address the issues, including a breakup. “By keeping the conglomerate structure, management is dooming all of its businesses to the 16x search [engine] multiple, instead of allowing them to trade at the much higher Netflix (NFLX)/Microsoft (MSFT) Azure/Trade Desk (TTD)/Tesla (TSLA) multiples,” contends Luria. “Management has already turned the company into Xerox, now it is turning it into pre-split GE. Google allowed the value of AI innovation invented in its labs to be captured by Nvidia (NVDA), Microsoft, and OpenAI while it trades at 16x earnings, much like Xerox (XRX) allowed Microsoft and Apple (AAPL) to take the value of the PC technology in the 80s. Now it is sticking with a conglomerate structure that should have disappeared with the GE breakup. Once GE got past its own hubris and unleashed its growth businesses, shareholders got what they wanted, the individual companies got the power of focus, and returns quickly followed.” Luria thinks Alphabet is worth $300 a share, broken up, compared to its current share price of around $260. Added Luria, “Only founders Sergei Brin and Larry Page can save shareholders. Given the multi-class shareholder structure, activist investors would have limited effect without getting support for this direction from the founders.” We are glad we opened this email! For full episodes of Opening Bid, listen on your favorite podcast platform or watch on our website. Yahoo Finance's Opening Bid is produced by Langston Sessoms
