Roth Capital Partners analyst Rohit Kulkarni delivered a report to clients on Friday where he reiterated a “Buy” rating on Google parent company Alphabet Inc (Alphabet Inc Stock Quote, Charts, News, Analysts, Financials NASDAQ:GOOGL), saying that a lot is riding for a number of big American tech companies, including Alphabet, on the upcoming US Supreme Court case Gonzalez v. Google.
The case originates in the November 2015 terrorist attacks in Paris where at least 130 people were killed and terrorist group ISIS took responsibility. American Nohemi Gonzalez was among those killed, and her parents subsequently sued Google, parent company of YouTube, with the allegation that YouTube aided and enabled recruitment of terrorists via content on its platform.
Google appealed to Section 230 of Title 47 of the US Communications Decency Act of 1996, which essentially gives immunity to online platforms as to third party content and says:
“No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”
The lower court ruling came out in favour of Google but the Supreme Court has since heard an appeal and granted a judicial review of the lower court decision.
Kulkarni said the implications are weighty for the tech industry and companies like Alphabet, many of whom have made filings to the Court supporting Section 230.
“Section 230 provides immunity in two ways: (1) A provider or user of an ‘interactive computer service’ can’t be treated as the ‘publisher or speaker’ of information provided by a third party; (2) Providers and users of interactive computer services can’t be liable for voluntarily taking down content if the provider believes in good faith that the information is obscene or otherwise objectionable,” Kulkarni said.
“Without Section 230, the [tech] companies would not be able to operate for profit, and all companies articulated said point in conjunction with the support of Google vs. Gonzalez being dismissed in court on Feb 21,” the analyst wrote.
As for Alphabet’s stock, Kulkarni maintained a $126 per share target price, which at the time of publication represented a projected one-year return of 32 per cent.
“Our $126 price target is based on 20x 2024E GAAP EPS and implies 18x P/E (ex-cash) plus ~$8/share in Cash and ~$5/share in Other Bets (Other Bets worth approx. $65 billion, incl. $50 billion in value assigned to self-driving car unit, Waymo),” Kulkarni wrote.
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