Google (NASDAQ: GOOGL) and Apple (NASDAQ: AAPL) are hegemonic and competing companies whose healthy rivalry fuels innovation. However, what happens when Apple has the upper hand?
Apple currently has a contract with Google that marks Google as the default web browser of Apple products. The contract is expiring next year, and rumors are circulating that Apple will not renew Google’s contract. Statcounter, a market research firm, estimates that Safari accounted for more than half of Google’s mobile traffic last month. Apple may replace Google’s search engine with that of Yahoo (NASDAQ: YHOO) or Microsoft’s Bing (NASDAQ: MSFT).
This is not a new obstacle for Google. Last year, Mozilla ended Google’s tenure as its default search engine on Firefox and replaced it with Yahoo, signing a 5-year deal. According to Statcounter, this transition impacted Google because approximately 14% of web browsers in the U.S. are Firefox.
On January 7th, analyst Anthony DiClemente of Nomura Holdings maintained a Buy rating and a $640 price target on Google despite rumors surrounding Apple’s search engine contract with them. DiClemente believes the “separation could create headline risk and disruption for Google users on iOS platforms,” but it would “result in a relatively contained financial risk.” The analyst estimates that Google losing Apple’s search engine contract would amount to $2 off the 2015 earnings per share of $29.17, and “this would result in a ~$47 (~7%) decrease in [his] $640 target price.”
Anthony DiClemente has rated Google 22 times since June of 2011. He has a 52% success rate recommending Google and a +11.1% average return per recommendation.
DiClemente has rated many websites in the past, including Facebook (NASDAQ: FB), Yahoo (NASDAQ: YHOO) and Netflix (NASDAQ:NFLX). He has been successful with Facebook and Yahoo, earning a 100% success rate recommending each stock. He has rated Facebook 9 times with a +17.2% average return and Yahoo 9 times with a +53.7% average return.
However, DiClemente did not see such success with Netflix. The analyst has rated Netflix 19 times since July of 2011 but has only been correct 43% of the time, earning a negative average return of -11.7% per recommendation.
Overall, DiClemente has a 59% success rate recommending stocks from the past year with a +5.1% average return.
Apple has not yet publicly announced what they will do when Google’s search engine contract comes to an end. How will Google shares be impacted if Apple choses a different search engine?
On average, the top analyst consensus for Google on TipRanks is Moderate Buy.