Alphabet Inc. (NASDAQ:GOOG) potential breakup of the company — could be reason to cheer

Alphabet Inc. (NASDAQ:GOOG) potential breakup of the company — could be reason to cheer

Alphabet Inc. (NASDAQ:GOOG) potential breakup of the company — could be reason to cheer

Alphabet Inc. investors have been sweating a potential antitrust investigation into the Google parent, but one analyst suggests that regulatory scrutiny — meaning a potential breakup of the company — could be reason to cheer.

Needham’s Laura Martin said Tuesday that a breakup of Alphabet GOOG, -0.15% GOOGL, -0.16% could carry about 50% upside for shareholders, in part because investors are generally willing to pay more for pure-play companies, when they can be more selective about how much exposure they get to a particular trend.

Martin also thinks that any companies formed after a breakup of Alphabet, which has long declined to provide financial metrics for businesses like YouTube, would be more forthcoming with their disclosures because they would be smaller entities. Management at the hypothetical new companies wouldn’t be able to hide behind search-ad financials, she wrote, and executives might not engage in as many expensive “moonshot” projects with “questionable” returns on investment.

She estimates there’s a 50% chance that the Justice Department determines that a breakup of Alphabet is “the best remedy” and a 50% chance that Alphabet is deemed to be anticompetitive. To Martin, this implies a 25% chance that the company could get split up three years from now.

The Justice Department is more focused on antitrust issues than privacy concerns, according to Martin, which lessens the “economic risks associated with regulatory outcomes.” The department also conducts investigations in a closed and silent manner, she said, meaning that if Alphabet was to disclose an investigation, investors might not hear anything further for at least two years.

Martin has a $1,350 price target on Alphabet’s stock and calculates a $1,579 per-share value of the company in a breakup scenario. She calls the stock “too cheap” given a recent selloff and her argument that the Justice Department won’t be looking at privacy issues.

Alphabet’s class A shares fell 0.2% Tuesday, but they have gained 3.5% so far this year. Facebook’s stock gained 1.9% in Tuesday’s session after an upgrade, and it’s up 35.9% on the year. The S&P 500 index SPX, -0.03%  has risen 15.2% in that time.

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 1,141.32.

The projected upper bound is: 1,141.73.

The projected lower bound is: 1,011.93.

The projected closing price is: 1,076.83.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 77.4876. This is not an overbought or oversold reading. The last signal was a buy 3 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 39.76. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 2 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -14. This is not a topping or bottoming area. The last signal was a buy 2 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 29 period(s) ago.

Rex Takasugi – TD Profile

ALPHABET INC C closed down -1.660 at 1,078.720. Volume was 6% below average (neutral) and Bollinger Bands were 58% wider than normal.

Open High Low Close Volume___
1,093.9801,101.9901,077.6031,078.720 1,437,063

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 1,073.90 1,169.37 1,126.54
Volatility: 43 35 35
Volume: 2,053,771 1,554,476 1,661,202

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

ALPHABET INC C is currently 4.2% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of GOOG.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on GOOG.O and have had this outlook for the last 27 periods.

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