Alphabet's Legal Woes May Create Buying Opportunity: Analyst

Core Viewpoint - Alphabet is in a critical phase characterized by strong business fundamentals, robust advertising performance, and leadership in AI and cloud computing, despite an impending antitrust ruling [1][2][4] Business Performance - J.P. Morgan analyst Doug Anmuth highlighted Alphabet's accelerating fundamentals and resilient advertising performance, maintaining an Overweight rating with a price target of $232 [3][4] - Google Cloud revenue grew by 32% year-over-year, while Search & Other revenue increased by 11% excluding foreign exchange impacts [9] Regulatory Environment - The U.S. Department of Justice's antitrust case is a significant concern, with a decision expected by August 8, 2025, which could reshape Alphabet's operational landscape [1][4] - Anmuth believes the most likely outcome of the antitrust case will involve prohibitions on exclusionary practices, particularly regarding Google Search [5][6] Financial Projections - Alphabet could face a 5% to 10% headwind to GAAP EPS in 2026 if stricter remedies are enforced [7] - U.S. Search & Other revenue is projected to reach $86 billion in 2026, accounting for approximately 78% of Alphabet's U.S. S&O segment [8] Valuation and Investment Outlook - Alphabet shares are trading at approximately 18.3 times 2026 GAAP EPS, which is considered attractive given the company's growth prospects [10] - Anmuth ranks Alphabet as his second-highest conviction pick, citing sustained leadership in AI, healthy growth in core ad businesses, and improving margin performance [11][12]