Jefferies analysts maintain ‘Buy’ rating on Alphabet despite antitrust risks Author: Investing.com

Investing.com – Jefferies analysts on Sunday reaffirmed a “Buy” rating on Alphabet Inc (NASDAQ:) despite lingering antitrust concerns, following a call with antitrust expert Glenn Manishin.

According to Manishin, the likelihood of Alphabet being forced to dissolve or facing significant financial penalties due to the ongoing legal battles is slim to none.

Manishin, a principal at ParadigmShift Law, has extensive experience, having served as legal counsel in landmark antitrust cases such as United States v. AT&T Inc (NYSE:) and United States v. Microsoft Corporation (NASDAQ:) .

His observations provide valuable insights into the Department of Justice’s (DOJ) ongoing antitrust case against Alphabet, particularly with respect to Google’s advertising technology platform and search business.

According to Manishin, Alphabet should not be subject to a forced breakup or be hit with large fines. Unlike the sale of Bell Systems to AT&T in 1982, such drastic measures are unlikely in this case.

The last forced sell-off was in 1911 of Standard Oil. Furthermore, the U.S. government does not have the authority to impose significant fines on antitrust violators, unlike practices in other jurisdictions.

The antitrust case could take a long time, potentially three to eight years. Manishin predicts the judge will need nine to 18 months to propose remedies, after which Alphabet will likely appeal.

The appeals process could benefit from several factors, including growing competition in the AI ​​space, potential changes in administration and historical legal theories that do not recognize capital as a barrier to entry.

Alphabet’s network effects are expected to play a key role in mitigating the risk. Manishin draws an analogy to Microsoft’s historical strategy of paying OEMs to preinstall Windows, leading to persistent network benefits even after such payments cease.

Similarly, even if a judge bars Alphabet from making payments to Apple Inc (NASDAQ:) in exchange for being the exclusive search provider, Alphabet’s strong network effects could ensure it remains the search engine of choice, potentially translating into margin benefits.

Manishin predicts the Google ad platform case, set to go to trial on September 9 in the Eastern District of Virginia, could have more significant financial implications than the Justice Department’s current search case.

The judge in the case could order behavioral remedies and even order the company to spin off its ad technology business from its search business, which would curb Alphabet’s dominance in the ad technology sector.

Stock valuation and prospects

Despite the legal challenges, Jefferies analysts see Alphabet’s current stock valuation as attractive. Alphabet shares are down 8% over the past month, compared with a 1% decline (COMP).

The company’s shares are valued at 11.6x projected calendar year 2025 enterprise value to EBITDA, which compares favorably with the 10-year average of 12x.