Alphabet (GOOGL) Thoughts if Store Fees Disappear Entirely - Credit Suisse

Credit Suisse analyst Stephen Ju reiterated an Outperform rating and $3,400.00 price target on Alphabet (NASDAQ: GOOGL) after a Federal Judge ruled that Apple’s App Store can no longer prohibit developers from providing links directing consumers to a separate payment flow. This potentially leads to a scenario in which app developers can more easily bypass the 30% fee to Google and Apple.

The analyst analyzed the potential impact in the extreme event that Play Store fees are eliminated and concluded the following: "As we contemplate the ‘max pain’ scenario and set Play Store commissions to 0% for 2022, our valuation for GOOGL shares would theoretically decrease to ~$3200 vs $3400 currently. We do not believe this is the end of these developments as: 1) Apple will likely appeal the decision, 2) publishers will likely see higher transaction friction and 3) publishers may experience decreased discoverability and traffic. Beyond the potential for a 0% Play Store fee, we believe app developers, given the benefit to customer lifetime value (LTV), will elect to spend more on user acquisition, which will likely see Google recapture some lost fees as search/app install revenue. Hence, our estimates remain unchanged and we maintain our Outperform rating based on the following: 1) ongoing monetization improvements in Search advertising through product/AI-driven updates, 2) greater-than-expected revenue contribution from non-Search businesses (YouTube, Cloud, and Play), 3) optionality and shareholder value creation from new monetization initiatives such as Maps, Discover tab, as well as the eventual commercialization of Google's Other Bets (Waymo, life sciences)."

For an analyst ratings summary and ratings history on Alphabet click here. For more ratings news on Alphabet click here.

Shares of Alphabet closed at $2817.91 yesterday.

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