Investing.com -- Barclays analysts said in a note Monday that Google’s proposed remedies in its antitrust case could lead to a significant upside for Alphabet (NASDAQ:GOOGL) shares.
The Proposed Final Judgment (PFJ) remedies, outlined by Google, reportedly suggest a pathway that could be operating income accretive by 10% or more, a notably positive outcome for the company.
Barclays (LON:BARC) analysts noted that Google's remedy package addresses about half of the issues raised in the court’s August 5 decision regarding exclusive default contracts.
“If the court accepts these remedies, Google’s revenue would largely remain unchanged, and its operating income would likely increase,” the note stated.
The bank adds that it contrasts with the Department of Justice’s (DoJ) suggested remedies, which Google argues are “overly punitive.”
Google’s defense is said to emphasize the importance of a balanced approach to antitrust remedies.
As highlighted in the Barclays note, Google has urged the court "to be careful not to have too heavy a hand when it comes to enhancing consumer welfare."
The bank believes the stance, coupled with a reduction in the TAC rate on all distribution deals while retaining ~100% of commercial queries, would represent a win for the tech giant.
The stakes are high, as Google’s trading multiple has compressed between 10%-20% since losing the monopoly trial.
Barclays believes a favorable ruling on Google’s remedies could lead to a strong rally in GOOGL shares. “If these remedies are chosen (a big ‘if’) over the DoJ's, GOOGL shares would likely rally significantly,” the analysts wrote.
Meanwhile, analysts at Bank of America (NYSE:BAC) noted that Google’s proposal would “be a more positive potential outcome vs DoJ proposal, with the key clause being maintenance of revenue sharing. The bank says it believes it would “give Apple (NASDAQ:AAPL) and other OEMs incentive to stay with Google for search.”
However, they add that the proposal “could open the door for greater competition on mobile devices from existing app and browser competitors, and new AI entrants (such as AI browsers or assistants on Samsung (KS:005930)).”