Analysts believe antitrust concerns surrounding Google, Apple, Amazon and Facebook are temporary and overblown
What, Big Tech worry?
The federal government may be mulling antitrust investigations of the Big Tech pantheon of Alphabet Inc.’s Google GOOGL, +1.52% GOOG, +1.62% , Apple Inc. AAPL, +3.66% , Facebook Inc. FB, +2.04% and Amazon.com Inc. AMZN, +2.18% , yet financial analysts insist investors have little to worry about for the foreseeable future. At least two characterize talk of corporate breakups and punitive measures as a temporary “overhang,” and investors sent their stocks higher after they struggled Monday in the wake of reports about the investigations.
“In the case of any company breakup (even if a possible outcome that would be years away), we actually see unlocked value as the various pieces within [Alphabet’s] conglomerate would likely warrant a higher valuation,” UBS analyst Eric J. Sheridan said in a note late Monday that seemed to summarize the attitude on Wall Street. He maintains a buy rating and price target of $1,420.
An investigation of Google seems especially curious, Sheridan and others pointed out, since the Federal Trade Commission conducted a broad investigation of Google in 2013 but did not take action.
Google and other big tech companies are locked in intensifying competition across multiple markets, analysts also pointed out. While federal regulators could scrutinize the reach of Google’s search and programmatic advertising, and “interplay” between the company’s app ecosystem and Android operating system, Sheridan theorizes, Google is slugging it out with Amazon, Apple, Facebook, Microsoft Corp. MSFT, +2.77% , Netflix Inc. NFLX, +4.98% and others for digital advertising, cloud computing and mobile hardware/software sales.
Google investors should also bear in mind the fortunes of Facebook stock, which has risen 23% in 2019 despite more than a year of relentlessly negative news. Rosenblatt Securities analyst Mark Zgutowicz sees no end in sight. The “likelihood of (a) breakup scenario still looks nil,” he wrote in a note late Monday that reaffirmed a buy rating and $242 price target for Facebook shares. That is 45% higher than the current stock price of $166.88.
Wedbush Securities analyst Daniel Ives feels much the same way about Apple, for which he maintains an outperform rating and price target of $235. A potential Justice Department investigation, Ives wrote in a note to investors, “will be an overhang on the stock, but ultimately we would encourage investors to focus on the fundamentals of Apple in the near-term as any probe would take many years to complete as we witnessed firsthand with Microsoft in the late 1990’s/early 2000s.”
He called the Microsoft investigation “more noise than a structural jolt to its business model.”
Cowen, which called initial reaction among Facebook and Google investors overblown in a separate note, did trim its price target on Apple from $245 to $220. However, its concerns have as much to do with Apple’s transition from a predominantly hardware company to services and subscriptions than a Justice Department probe, which it calls an “overhang” for Apple.
Three of the four big tech companies under scrutiny did not immediately comment, but Apple Chief Executive Tim Cook made it clear in an interview with CBS News late Monday that the iPhone maker is “not a monopoly.”
“I think we should be scrutinized,” Cook said. “But if you look at our – any kind of measure about is Apple a monopoly or not, I don’t think anybody reasonable is gonna come to the conclusion that Apple’s a monopoly. Our share is much more modest. We don’t have a dominant position in any market.”
In Tuesday afternoon trading, Apple shares were up 3.5%, Alphabet shares rose 1.2%, Facebook’s stock advanced 1.8% and Amazon shares tacked on 1.8%. The tech-heavy Nasdaq Composite Index COMP, +2.65% gained more than 3%, while the S&P 500 index SPX, +2.14% and Dow Jones Industrial Average DJIA, +2.06% were both up about 1.8%.