DOJ Secures Win Against Alphabet, Impacts Gannett's Future

A recent report indicates that the U.S. Department of Justice is succeeding in its antitrust case against Alphabet, likely benefiting Gannett. This could lead to significant financial implications for Gannett, possibly transforming its balance sheet and impacting stock prices.

Date: 28-09-2024

AI Rating: 7

The Department of Justice (DOJ) is advancing in its antitrust case against Alphabet (GOOG, GOOGL), which alleges illegal practices to maintain dominance in the search engine market. Such a ruling has considerable implications for the advertising sector and for companies like Gannett (GCI), which is capitalizing on this situation.

Gannett has filed a lawsuit closely aligned with the DOJ's allegations, citing Google's monopolistic control over advertising space that depresses competition and reduces available resources for news content. The case’s proceedings benefit from pre-existing legal work and discovery from the DOJ case, making Gannett's argument stronger.

Management’s anticipation of "substantial damages" from the lawsuit could significantly impact Gannett's financial structure, potentially erasing its existing debt of approximately $1.09 billion. If damages align with forecasts discussed by investors, the financial restructuring could transform Gannett’s balance sheet entirely.

Furthermore, a notable aspect of Gannett's case is its representation by the antitrust law firm Kellogg Hansen on a contingency basis. The firm's history of securing large payouts suggests a strong belief in the case’s potential success. Legal outcomes could lead to a shift in Gannett's enterprise value while lowering debt burdens and improving its EBITDA ratio.

The current forward enterprise-value-to-EBITDA ratio of Gannett is under 6, which is notably conservative when compared to more thriving companies like The New York Times, trading near 19 times. A favorable outcome from the lawsuit and reduced debt may allow for a re-evaluation of Gannett's stock, leading to positive sentiment among investors and potentially higher stock prices.

Stocks: GOOG GOOGL GCI