Alphabet Inc’s Google (GOOGL) is reportedly in advanced talks to buy a $4 billion stake in Reliance Industries’ digital unit Jio Platforms Ltd. seeking to join rival Facebook Inc. (FB) in the chase for growth in India’s promising internet market.
The California-based search giant has been discussing the investment and an announcement could come as soon as the next few weeks, Bloomberg reported. Should the talks with Google succeed and result in a deal, that would further shore up Jio’s credentials in its push to upend online retail, content streaming, digital payments, education and health care in a market of more than a billion people.
Jio Platforms, a majority-owned subsidiary of Reliance Industries, is a next-generation technology platform focused on providing affordable digital services across India, and has more than 388 million subscribers.
The report comes a day after Google said that it will commit $10 billion for investments into India over the next 5-7 years through a mix of equity investments, partnerships, and operational, infrastructure investments.
Google CEO Sundar Pichai said that “low-cost smartphones combined with affordable data, and a world-class telecom infrastructure, have paved the way for new opportunities” in India. In 2004, Google opened its first offices in India in Hyderabad and Bangalore.
India’s Jio has in recent months attracted investments from a string of large corporates, including Silverlake and Facebook, who have poured over $15 billion into the tech platform. An investment arm of Qualcomm Inc. (QCOM), the world’s largest mobile chipmaker, this week announced the acquisition of a 0.15% stake in Reliance’s Jio for 7.3 billion rupees ($97.1 million).
Shares in Google have fully recovered since dropping to a low in March and are now trading 13% higher than at the start of the year. Indeed following the rally, the stock’s upside potential now looks more limited. The average analyst price target of $1,566.04 indicates shares will advance a modest 3.6% over the coming year. (See Alphabet’s stock analysis on TipRanks)
Meanwhile, five-star analyst Brian White at Monness projects some downside potential in the shares amid expectations that Alphabet’s earnings will be depressed in the coming quarters and revenue growth will be well below historical trends due to the impact of the coronavirus pandemic.
“For the foreseeable future, we anticipate Alphabet will struggle with weak digital ad spending trends and other headwinds…including uncertainty over the impact of recent ad boycotts and anti-trust investigations,” White wrote in a note to investors. “However, we believe the stock remains inexpensive and represents a core holding as this crisis accelerates the digital transformation trend.”
White has a Buy rating on the stock with a $1,420 price target (6.1% downside potential)
Overall, the Wall Street rating outlook for Google remains bullish. The Strong Buy analyst consensus boasts 28 Buys versus 1 Hold.
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