BofA Sees Alphabet Stock Rallying Despite Potential DoJ Remedy

Bank of America expects a crucial Department of Justice remedy ruling on Alphabet's Google search business soon. The legal process may extend into 2027, but even a neutral outcome could clear a near-term stock overhang. The bank outlines three main areas of potential remedies: Chrome divestiture, payments of traffic acquisition costs, and search data sharing requirements. A Chrome divestiture would be more disruptive to Alphabet, while eliminating TAC agreements and introducing choice screens could reduce Google's search query share and data advantage.

Bank of America (BofA) has highlighted that a crucial Department of Justice (DoJ) remedy ruling on Alphabet's Google search business is expected soon, marking a key near-term focus for the stock. The legal process could extend into 2027, as Google plans to appeal, but even a neutral outcome could potentially clear a near-term stock overhang, according to BofA [1].

The bank outlines three main areas of potential remedies the DoJ might pursue: "Chrome divestiture," Google's payments of traffic acquisition costs (TAC) for default search placement, and search data sharing requirements. A structural remedy such as a Chrome divestiture, while rare in U.S. precedent, "would be more disruptive to Alphabet" by reducing synergies and scale across its ecosystem, according to the bank [1].

On the behavioral side, BofA notes the market largely expects the elimination of exclusive search deals and the introduction of "choice screens." The biggest concern is said to be a possible mandate to reduce or eliminate Google's TAC agreements, estimated at $17.5 billion to Apple (NASDAQ:AAPL) in the U.S. in 2026 [1]. BofA believes such a change "could reduce Google's search query share and incentivize mobile OEMs to pursue partnerships with AI competitors."

New data sharing rules could also dilute Google's "data advantage," undermining its differentiated advertising platform and increasing competition. Currently trading at about $202, Alphabet's valuation, at 19 times 2026 earnings, is below the S&P 500's 22 times, reflecting a "regulatory discount," said BofA [1].

The bank's analysts conclude that if the court imposes choice screens but limits TAC or data sharing changes, "the Street could view the outcome as a positive for the stock." BofA has a Buy rating and $217 price target on Alphabet shares [1].

References:
[1] https://www.investing.com/news/stock-market-news/alphabet-vs-doj-bofa-outlines-possible-remedies-4185135