Wedbush: Antitrust Interest In Tech Companies Mostly Noise, Breakups Unlikely

Tech giants in the FAANG group should weather Justice Department antitrust scrutiny over the long term, Wedbush said Wednesday after a report of a broadening probe.

What Happened

The Wall Street Journal first reported the Justice Department will investigate tech antitrust questions, likely including Apple Inc. AAPL, Facebook Inc. FB, Amazon.com Inc. AMZN and Alphabet Inc. GOOGL’s Google. Another probe by the Federal Trade Commission also is ongoing.

But breakups of the companies are unlikely, analyst Daniel Ives said, adding heightened government interest may even prove positive.

Major Shot Across Bow

Ives acknowledged in a note the DOJ was firing a “major shot” across the tech bow, and the investigations could be a short-term overhang on the stocks.

But, “we ultimately believe this is more noise vs. the start of broader structural changes across the tech food chain and will likely result in business model tweaks and potential DOJ/ FTC fines in a worst-case scenario rather than forced breakups of the underlying businesses,” Ives wrote.

“We would encourage investors to focus on the fundamentals in the near-term as any probe would take many years to complete,” Ives added.

Ives also noted investigations into business models sometimes spur innovation and diversification, noting Facebook has announced a move into cryptocurrency and Google has acquired a cloud data analytics business.

Online Sentiment Dropped

Investor sentiment data compiled by StockTwits showed that after the WSJ story hit Tuesday afternoon, several of the companies saw significant drops in investor sentiment.

Alphabet saw one of the biggest, going from an average of 83% bullish in early afternoon to 57% bullish later in the day. Amazon and Facebook saw drops in bullishness on StockTwits, though much smaller, and both remained at or above 70% bullish after the story. Apple sentiment was essentially flat.

All four of the mentioned stocks were down slightly Wednesday, with Amazon seeing the biggest drop, off 0.59% to $1,982.82.

Related Links:

Mnuchin Defends DOJ Antitrust Probe, Confirms Trip To China

Facebook, FTC To Settle Privacy Charges For $5B