Google Just Won Its Case - What Investors Should Do Now
These notes were generated by AI and may contain inaccuracies.
Google won the most favorable outcome in its antitrust lawsuit, overhanging for nearly 5 years. Judge Amit Mehta ruled Google avoids selling Chrome, crucial for connecting Google's services like Gmail, YouTube, and Google Drive with combined logins, synced bookmarks, and extensions. Stock up 9% to $230 per share, surpassing all-time highs.
Decision changes Google's interactions with businesses like Apple, imposes conditions for sharing information. Full outcome is a clearing event for Google, impacts future and valuation. Host holds Google as one of largest positions. Google's legal team statement provided. Commentary includes critics upset Google not broken up.
Jonathan Caner upset, saying missed opportunity for judge to reinvent markets.
Gene Munster 3 months ago called Google eBay with slow decline to obsolescence; now bullish, his new long. Mark Mahaney, top analyst, stuck neck out saying long and undervalued; host agrees Google remains undervalued, shared case yesterday, reviews Mahaney's today. Win for Apple too.
Other news: Netflix lets users customize clips, share on mobile. Compares Lululemon and Crocs apparel stocks, picks better buy.
Four basic parts. Biggest: no forced sale of Chrome, browser with billions of users, access to web, integrates Google properties.
Google can't pay for exclusive search engine status on devices/browsers but can pay for distribution, e.g., to Apple, Mozilla. Prohibition would harm recipients. Judge protects ecosystem; Google pays billions to browsers/distributors.
Judge approaches remedies with humility; competitive dynamics changing due to AI. Introduction to 230-page decision notes evolving landscape since liability trial. Google dominant, no rivals took share, but generative AI (GenAI) like ChatGPT, Perplexity, Claude used by tens of millions for information previously from search. Not replacing GSSE (general search engine) yet, but expected to add search-like features.
Judge uses thoughtful analysis of current and future competition in information gathering (search + GenAI, blurring lines). Competitors gaining users rapidly, transforming into search engines (scraping internet, Reddit, news).
GenAI changed case course. Google faces competitors; traded at 18-19x P/E vs. peers 27-35x due to case uncertainty and GenAI threat (e.g., ChatGPT vs. Google search). Ironic: ChatGPT, Perplexity, Claude provided competitive forces, preventing breakup/Chrome sale.
Strong reasons not to jolt system, allow market forces.
Google evolves: AI Overviews, AI Mode in search, Gemini app. Competes daily to maintain dominant share despite not sitting on laurels.
Allows Google to pay Apple >$20B/year as default on Safari. Google fine without it ($70B FCF → $90B for buybacks/dividends/capex), but weakens moat slightly; pays for security/largest market share.
Win: keep Chrome (not revenue generator but glue for services, drives adoption). Worth 5-9% stock rise.
Penalties: share some search data with competitors to build scale/better results, diluting default payment advantages. Google's data flywheel: data → better results → usage → data. Not sharing advertising data or crucial graph data. Biggest penalty.
No choice screens (e.g., scroll lists on new phones); intrudes product design, red line for courts (vs. Europe).
Google built Chrome from ground up, great stewards (free, secure, updated; dominant even in Europe). Selling to likes of Perplexity (no scale experience) injustice to shareholders, employees, users. Judge thoughtful, targeted; not scot-free (data sharing). Google may appeal data sharing over safety/security.
Best outcome for Google investors.
4 months ago (April 25, 2025), Google at $164; Gene Munster on CNBC bashed as eBay. Host video: undervalued >$200, strong vs. competition (Waymo, YouTube, cloud), earnings growth tools. Up 40% since. Sentiment shifting.
Host portfolios: Passive income - $75K Google, $17K gains ($6K today); Story fund - $49K, $26K gains ($3-4K today). Total ~$10K gain today.
Jonathan Caner: Disappointing, missed transformative opportunity. Liability decision bold, gave discretion. Heartburn over kicking can on payments to Apple (billions/year); if remedy fails, revisit. For violator, wanted definitive.
Caner wants punishment, not competition; ignores new info gathering ways.
3 months ago, confidently Google = eBay, slow decay (not Kodak overnight). Now 180° flip on sentiment/earnings. Common for inexperienced; host relied on numbers (search query volume/revenue growth despite anecdotes/ChatGPT). Data = compiled anecdotes; Google grew consistently.
Analyst counters comparison of Google to Kodak, calling it more like eBay with slow decay over time. At $230, he's bullish on Google. Regulatory bark bigger than bite, more lenient outcome positive for Google, Apple, and Meta. Meta not up as much as expected. Regulatory relief allows focus on Google's AI progress: AI Overviews, AI Mode, and three search panels with increasing adoption, especially AI Mode's recent speed.
Impact on Apple overstated; relationship and paychecks likely continue, not a game-changer. Jean views it as benefit for entire AI space and always ties positives to Apple.
Mark Mahaney from Evercore ISI, bullish on Google throughout uncertainty and ChatGPT threats, said day before decision Google 50% undervalued with 50% upside. Post-decision, after 9% rise, still top pick and undervalued.
Well, we guessed that Google was going to avoid worst case scenario. And they did. Results better than expected for bulls. Judge's 230-page decision thoughtful on search and technology, notes GenAI changes facts on ground. Let technology determine market shares forward. Identified monopolist, laid strictures, respectful of market. Clearing event for shares. Focus on fundamentals and attractive valuation.
Reward for staying bullish during lows over sentiment-driven shifts. Use data, numbers, fundamentals to dictate sentiment. Mahaney example of ignoring negative sentiment.
Road ahead: Maintain double-digit search revenue growth (11-12-13% for 2 years). Underappreciated: Quality of Google leads rising due to fewer paid clicks, making clicks more intentional, higher quality leads boost pricing. GenAI improves ad targeting and selection like Meta.
Amplification catalysts:
- Accelerating YouTube revenue
- Accelerating Google Cloud revenue
- Waymo expanding
25x multiple on this/next year numbers to $275; on 2027 earnings to $325. Calls $300 target. Still lots of upside.
Temptation to take gains after big move, but Google at low 20s PE after rise to $230 all-time highs deserves this valuation historically. Not overstretched, growth not slowing/topped, not saturated. Trades below comparables. If competes with ChatGPT/Perplexity, hold. No intention to sell. Congratulations to Google investors.
Netflix update to Moments feature: Customize/share clips on mobile. Choose start/end points, adjust length, saves to My Netflix tab for rewatch/share. Basic timeline interface.
Small but at scale; clips sharable on Instagram Reels/TikTok for viral content growth, improving sharability like YouTube for organic reach.
Lululemon: 13-14 forward PE, down 46% YTD. Heightened competition, decelerating revenue, sharply lower earnings growth estimates, declining free cash flow. Shifting from organic/word-of-mouth to sponsorships/paid ads.
Crocs (owns Crocs, Hey Dude brands, casual leisure): Tough year but better than Lululemon. Forward PE below 9 (commodity multiple ~13 prices in no growth). 2022 massive growth, now 2% in 2024-2025.
Prefer Crocs: Lower valuation limits downside, any growth resumption moves to 10-13 PE for big gains.
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