Jim Cramer: US Suit Against Google Makes Alphabet Stock 'Strong Buy'

Investment guru Jim Cramer said on Tuesday that he believes the government’s antitrust lawsuit against Alphabet Inc.’s Google is a “loser case” and will only lift the price of parent company Alphabet Inc.

“I’ve been saying over and over again, they ought to break this company up and bring out value. It’s the DOJ taking it from buy to strong buy,” the “Mad Money” host said on CNBC.

“Ultimately, Google, if they break it up, then you own the stock. If they don’t break it up, then you own the stock. It’s a pretty good situation.”

The U.S. Justice Department filed an antitrust lawsuit against Alphabet Inc's Google on Tuesday, accusing the $1 trillion company of illegally using its market power to fend off rivals and said nothing was off the table, including a breakup of the internet search and advertising company.

The lawsuit marks the biggest challenge by the United States to the growing power of tech companies in a generation, comparable to the lawsuit against Microsoft Corp. filed in 1998 and the 1974 case against AT&T which led to the breakup of the Bell System.

Cramer predicted the Department of Justice is likely to struggle to prove its case that Google abused its market power in its search and advertising business, CNBC said.

“I just think it’s another ‘loser case’ by the government. And by the way, the sum of the parts is worth far more than $1,500,” Cramer said.

Alphabet shareholders would be winners if the government were to force Google’s parent to split up, Cramer said. Shares of Alphabet (GOOGL) were up more than 2% in late trading Tuesday. The stock is up about 15% in 2020, outpacing the broader S&P 500, which has advanced nearly 7% year to date.

The complaint, which was joined by 11 states, says Google acted unlawfully to maintain its position in search and search advertising on the internet, and says that "absent a court order, Google will continue executing its anticompetitive strategy, crippling the competitive process, reducing consumer choice, and stifling innovation."

The government said Google has nearly 90% of all general search engine queries in the United States and almost 95% of searches on mobile, Reuters explained.

Attorney General Bill Barr said his investigators had found Google does not compete on the quality of its search results but instead bought its success through payments to mobile phone makers and others. "The end result is that no one can feasibly challenge Google's dominance in search and search advertising," Barr said.

When asked on a conference call if the department was seeking a breakup or another remedy, Ryan Shores, a Justice Department official, said, "Nothing is off the table, but a question of remedies is best addressed by the court after it's had a chance to hear all the evidence."

In its complaint, the Justice Department said that Americans were hurt by Google's actions. In its "request for relief," it said it was seeking "structural relief as needed to cure any anti-competitive harm." "Structural relief" in antitrust matters generally means the sale of an asset.

"Ultimately it is consumers and advertisers that suffer from less choice, less innovation and less competitive advertising prices," the lawsuit states. "So we are asking the court to break Google's grip on search distribution so the competition and innovation can take hold."

Google called the lawsuit "deeply flawed," adding that people "use Google because they choose to - not because they're forced to or because they can't find alternatives."