Alphabet Inc (NASDAQ: GOOGL) ended in the red on Tuesday after the U.S. Department of Justice filed a civil antitrust lawsuit against Google.
DOJ is going after Google’s advertising business
The lawsuit seeks to challenge Google’s monopoly in advertising – a business segment that brought in $54.5 billion in its latest reported quarter.
States that joined the DOJ against the tech behemoth include California, New Jersey, Rhode Island, Virginia, Tennessee, Connecticut, New York, and Colorado. Reportedly, the Department of Justice wants Google to divest parts of its advertising business to allow for more competition.
The stock market news arrives only days before the multinational is scheduled to report its fourth-quarters results. Consensus is for it to earn $1.17 a share – down about 24% versus last year. Google stock is currently up 10% for the year.
Analyst explains how it’ll affect Google stock
It’s the second lawsuit that the DOJ has filed against Google in a little over two years (first under the Biden’s administration). Sharing what this development might mean for the Google stock, Evercore ISI’s Mark Mahaney said on CNBC’s “Closing Bell”:
This had been building for a while. It’s going to be an overhang on Google shares, call it, one to two or three points on the price-to-earnings multiple. That’s the drag I think you’re going to have to expect for the next couple of years.
He expects the lawsuit to be an opportunity for the likes of Meta Platforms, Amazon, and Apple Inc. Earlier this week, Alphabet Inc said it will lay off 12,000 of its employees (find out more).
In October 2020, the Department of Justice had accused Google of anticompetitive behaviour in internet search as well. That case will go to trial later this year.
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