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Yesterday, on June 14th, the European Commission issued a Statement of Objections to the search giant alleging an abuse of its dominant market position within the ad tech industry and suggested that Google divest DFP and AdX, its ad exchange and ad auction platforms, as otherwise there’d be “complexity of monitoring any potential behavioral changes should Google be found to have violated antitrust rules.”
In their response to the findings, Citi analysts note that today’s “announcement is similar to the DOJ’s Jan-23 antitrust suit against Google, increasing the risk that GAM is divested,” but believe “Google’s core DV360 is likely to be unaffected.”
Despite the increased scrutiny and potential punitive measures, the analysts say “a possible divestiture would impact a relatively smaller portion of Google’s Network Websites revenue, which in 2022 reached $32.8 billion and accounted for ~12% of gross revenue.”
They further highlight that “Network Websites accounts for a significantly lower percentage of profitability,” and as such estimate “the divestiture of GAM is likely to have a limited impact on Google’s revenue and an even smaller
impact on profitability.”
Analysts reiterated a Buy rating on the shares with $130 Price Target, as they noted that despite the “macro-economic challenges, we believe the broader online advertising market continues to stabilize and our target multiple accounts for limited visibility into Bard’s integration into Search, as well as decelerating growth at GCP.”
GOOGL closed at $123.67 yesterday, and has gained nearly 40% YTD.
