Google Stock May Pop 325% As Breakup Cuts $67 Billion From Synergies

Forbes

3 hours ago

Google's stock could rise 325% by 2035 if the company is broken up into five parts. However, the resulting loss of operating synergies could cost Google $67 billion in revenue lift and cost savings.
A judge is expected to order Google to take action after the company was found guilty in an antitrust trial, according to the Washington Post. Since the judge, Amit Mehta, could order Google to divest its Chrome browser, analysts have been estimating what Alphabet would be worth if it is split up.
To create an optimal outcome for investors and customers, Google may wish to pursue a strategic middle path with the following elements:
This approach would preserve the operational synergies of keeping the company partially together while boosting the company's market value more than if Alphabet's structure remains unchanged.
Google says a breakup would make the company worse off. 'A combination of all the remedies makes it unviable to invest in research and development,' Alphabet CEO Sundar Pichai testified in April, according to the Post. The Justice Department's proposed remedies would leave the 'company's intellectual property without value,' Pichai added.
I have contacted Google to request comment and will update this post if I receive a response.
Alphabet's Breakup Value To Shareholders
Since Mehta could order Alphabet to divest Chrome, analysts have been speculating on Alphabet future value if the pieces of the company were independent.
An August analysis of the breakup value would put a $3.7 trillion on the company were it split into five units. Here are the valuations of the individual business units:
The Loss To Customers Of Breaking Up Alphabet
This breakup analysis ascribes no value to the companies being under the same corporate parent. However, that ignores substantial benefits of keeping the various units together.
For instance, there are network effects – meaning the more Google services a user adopts, data sharing and integration make the individual services more valuable. In addition, profitable units like search can fund experimental ones such as Waymo during their development phases. Finally, as part of Alphabet, these units can negotiate lower prices with device makers, telecom service providers, and content partners.
These ecosystem benefits are worth an estimated $67 billion at the high end. Here are the biggest contributors:
What Alphabet Should Do
To retain some of these synergies, Alphabet could pursue a strategy that would optimize benefits to shareholders and customers, as follows:
This strategic middle path could more than double Alphabet's stock market capitalization to about $6.9 billion by 2035. This assumes a compound annual growth rate of 11% from AI-driven growth, a strong position in advertising, expanded ecosystem benefits, and capturing some of the premium benefits from the partial breakup.
Wall Street is modestly optimistic about the future value of Google's stock. The 16 analysts who cover the stock estimate 8.8% upside given an average price target of $219, according to TipRanks.