Should Alphabet be broken up?

Brian Sozzi · Executive Editor

Wed, May 14, 2025, 7:45 AM

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!

00:00 Brian Sozzi

I'm Yahoo Finance executive editor Brian Sozzi here with the opening bid podcast stock of the day, one minute on the clock. And you know, sometimes you come across some really good research in your very crowded inbox and you just have to click on it. For me, that is a new note on Alphabet from a tech analyst Gil Loria. The headline on this one is, quote, time to break it up and unleash shareholder value. Of course, the headline with a headline like that will certainly catch my attention. Gil's case is this, he thinks Google essentially is mirroring, this is not a good class to be in, Xerox and General Electric, companies that perhaps gotten too big for their britches and the market is not valuing them correctly. Gil makes the case that if Google is broken up, which could happen because the company isn't focused right now with enforcement officers or members of the government with that and that breakup could happen. Loria makes the case that Google could be worth or Alphabet could be worth up to $300 a share. The stock is trading about $160 a share now. He also makes up a good point that it depends right now what happens with Google. If it is split up, it is depends on founders Sergey Brin and Larry Page. They have multi-class shareholder structure there. So what happens to this company falls on them. But again, Loria making the case, the company's undervalued current levels as the search business comes under attack by likes of Perplexity and ChatGPT. Good note by Gil and his team. And that's it for the opening bid, stock of the day.