DOJ investigation into Google search deals has 4 potential outcomes, BofA says
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Investment firm Bank of America said on Wednesday that there are four potential outcomes from the Department of Justice's investigation into Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) search deals with smart device makers, including three that could benefit the Sundar Pichai-led giant.
The first scenario could be that Google (GOOG) (GOOGL) wins the case and there are no changes to the deals with Apple (AAPL) and other Android manufacturers, analyst Justin Post said, adding it would be a positive as there would be "less overhang" for Google.
Post has a buy rating and $146 price target on Alphabet (GOOG) (GOOGL).
A second scenario could result in the U.S. Court prohibiting default search deals in the U.S. only, which Post said could be a "positive" and add as much as 85 cents per share in earnings due to Google cutting down its traffic acquisition payments.
However, Post conceded that this scenario could also add uncertainty to Google's search market share compared to Microsoft's (MSFT) Bing or potentially create a new concern that Apple (AAPL) could build its own search engine.
A third scenario, which is perceived as a "worst case" for Google, would result in the court prohibiting Google's default deals but allowing others. Mountain View, California-based Google (GOOG) (GOOGL) would lose search traffic from both iOS and Android devices, though it would save on traffic acquisition costs and could potentially result in consumers switching back to Google anyway.
A fourth and final scenario could see the court ruling that open bidding for search must take place by region or platform. Post said this could be a "negative" for Google, given that the company chooses to do traffic acquisition cost deals, but it could also reduce these costs and ultimately be accretive to earnings per share.
Last month, a U.S. District Judge narrowed the scope of the case, dismissing some of the DOJ and states claims against the tech giant.

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