Alphabet Inc. (NASDAQ: GOOGL) is under intense scrutiny as it faces a $6.6 billion (£5 billion) class action lawsuit in the UK, alleging abuse of its dominant position in the online search market. The legal battle, coupled with a downgrade in stock price target by Cantor Fitzgerald, is shaking investor confidence, driving GOOGL stock lower in pre-market trading.
Class Action Lawsuit Targets Google’s Advertising Monopoly
Filed in the U.K. Competition Appeal Tribunal by competition law expert Or Brook, the lawsuit represents hundreds of thousands of British businesses who advertised on Google between January 1, 2011, and April 16, 2025. The core allegation: Google used its near-total control of online search to unfairly inflate advertising costs.
Allegations Include
Google forced UK advertisers to rely solely on Google Ads to reach audiences. It struck deals with companies like Apple (NASDAQ: AAPL) to pre-install Google Search and Chrome as defaults. Preferential treatment to its own tools like Search Ads 360, putting rivals at a disadvantage.
The lawsuit comes amid a global wave of regulatory crackdowns on Big Tech. The UK’s Competition and Markets Authority (CMA) previously reported Google capturing nearly 90% of search ad revenue.
GOOGL Stock Tumbles: Analyst Cuts Target Amid Uncertainty
While legal risks mount, Cantor Fitzgerald analyst Deepak Mathivanan slashed his GOOGL stock price target from $200 to $159, maintaining a Neutral rating. The revision cites slowing growth in Search and YouTube revenues, now expected to rise just high single digits year-over-year in Q1 2025, excluding FX effects.
Analyst Insights
Search & YouTube revenue growth may fall to 3% YoY in H2 2025. Cloud revenue growth is decelerating from 30% to the mid-20% range. Alphabet’s fiscal 2026 EPS estimate revised to $9.45, below consensus ($10.11). Despite strong balance sheet metrics, macro risks and AI competition remain concerns.
According to InvestingPro, Alphabet remains fundamentally strong with: A “GREAT” financial health score of 3.29, A PEG ratio of 0.5x indicating growth potential, A P/E ratio of 19.51x, suggesting slight undervaluation.
AI Innovation Marches On Despite Legal & Market Headwinds
Even as Alphabet faces legal pressure and cautious investor sentiment, the company continues to expand its AI offerings:
- Google’s Veo 2 now allows high-resolution video generation from text.
- The DolphinGemma AI model is decoding dolphin language in collaboration with researchers.
- Google Workspace integration now supports Claude’s AI Research feature through Anthropic.
What’s Next for GOOGL Stock?
GOOGL stock remains a battleground for investors. TipRanks shows a Moderate Buy consensus based on 27 Buy and 10 Hold ratings, with an average price target of $203, implying ~30% upside from current levels. However, recent legal troubles and slowing revenue growth have introduced fresh risks.
With Alphabet at the crossroads of legal pressure, slowing growth, and AI innovation, investors will closely monitor upcoming earnings reports, antitrust rulings, and macro trends to gauge the stock’s long-term trajectory.
