Revised Google Stock Price Forecast by Analyst
Going Big, Breaking Up: Why Alphabet's Stock Price Might Soar if Google Gets Divvied Up
Alphabet's shares could be worth a staggering $3.6 trillion if Google, the tech behemoth, breaks apart, according to Gil Luria, an analyst at DA Davidson. Here's why that's a tantalizing prospect.
In the face of mounting legal pressure from both the U.S. and China, Luria proposed an unconventional yet promising price target for Alphabet (NASDAQ: GOOGL). He advocates for a 'big bang breakup,' instead of the suggested 'isolated spinoffs' by the Department of Justice (DoJ).
Luria's argument revolves around the idea that Google's sheer size holds it back, and that a breakup could unleash remarkable returns for its shareholders. He identifies six likely firms that could emerge from a split: Search, Cloud, TPU, Deepmind, YouTube, Network, and Waymo. Google Search would lead the pack, valued at just over $1 trillion, while the autonomous driving car company Waymo would take the rear at approximately $181 billion.
The key to this argument lies in Google's humble multiple of 16x its forward earnings. Luria believes that Google's AI successors could swiftly surge to a 23 multiple if they were separate entities. This revaluation could boost Alphabet shares between $240 and $300, representing an impressive 81.82% jump from its current price of $165.29.
Shareholders' Dream Run
Breaking Google up into smaller, more focused businesses would likely enhance their overall value. Luria's analysis suggests a potential $3.7 trillion valuation for Alphabet Inc., should the company be divided. This explosive increase could be attributed to the elimination of the 'diversification discount' historically imposed on conglomerates like Google.
Clearer Skies for Google
A breakup could help Google navigate the turbulent seas of regulatory pressure and antitrust lawsuits. By separating its businesses, the company might be able to address monopoly concerns that the DOJ has been scrutinizing. Smaller, independent companies are often more agile and adaptive, which could lead to faster growth and better response to changing market trends.
In summary, if Google were to split, both its shareholders and the company itself could find themselves reaping a cornucopia of benefits. The potential for higher valuations, increased competitiveness, and alleviated regulatory pressure is an alluring proposition in this fast-paced tech landscape. However, such a significant shift would come with its fair share of organizational and strategic challenges.
- With a potential breakup on the horizon, Alphabet's shareholders might find significant investment opportunities in the growing valuations of Google's spin-off companies, particularly in areas like technology and finance.
- A 'big bang breakup' could not only open doors for potential higher returns for shareholders but also enable Google to navigate the complexities of regulatory pressure more efficiently due to the agility and adaptability often associated with smaller, independent companies.
