Market Overview

Analyst: Huawei Blacklist Is $400M Risk For Google

Share:
Analyst: Huawei Blacklist Is $400M Risk For Google

Plenty of Wall Street analysts have weighed in on Apple, Inc. (NASDAQ: AAPL)’s exposure to the U.S. trade war with China.

On Friday, one analyst said Alphabet, Inc. (NASDAQ: GOOG) (NASDAQ: GOOGL) could be at risk of losing more than $400 million in annual sales as a result of the recently announced Huawei blacklist.

The Analyst

Nomura Instinet analyst Mark Kelley reiterated a Buy rating on Alphabet with a $1,300 price target.

The Thesis

While popular U.S. apps like Facebook, Inc. (NASDAQ: FB) and Netflix, Inc. (NASDAQ: NFLX) are banned in China, Google has exposure to Huawei through the licensing its Android operating system to the company, Kelley said in a Friday note. (See his track record here.) 

Google’s Play Store sales have major exposure to Huawei’s roughly 500 million global smartphone users, the analyst said. The sales most at risk are the 48 percent of Huawei’s sales that took place outside of China in 2018, he said.

Google’s services are blocked in mainland China, but Huawei uses a modified version of Android outside of China.

In a worst-case scenario, Kelley said Google could lose between $375 million and $425 million in Play Store revenue annually due to the Huawei blacklist.

In addition, Huawei is reportedly planning on launching its own mobile operating system as soon as the second half of 2019.

“While this could be a long-term solution to Huawei’s reliance on Android, we believe it will prove challenging to scale outside of China, especially if existing carriers continue to show a reluctance to back new device launches outside of China,” the analyst said. 

Despite the trade war exposure, Nomura Instinet remains bullish on Alphabet shares in the long-term.

Price Action

Alphabet Class A shares were down 0.24 percent at $1,142.56 at the time of publication Friday. 

Related Links:

Trade War Update: Trump Says Huawei Blacklist Negotiable, G20 Meeting In Jeopardy

Cannabis Still Can't Be Sold, Promoted On Facebook Or Instagram

Public domain photo via Wikimedia

Latest Ratings for GOOG

DateFirmActionFromTo
Jan 2021Credit SuisseMaintainsOutperform
Oct 2020MizuhoMaintainsBuy
Oct 2020Credit SuisseMaintainsOutperform

View More Analyst Ratings for GOOG
View the Latest Analyst Ratings

 

Related Articles (GOOG + GOOGL)

View Comments and Join the Discussion!

Posted-In: Huawei Mark Kelley Nomura InstinetAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
TSLAJP MorganMaintains125.0
INTCTruist SecuritiesMaintains64.0
FBTruist SecuritiesMaintains320.0
GSCitigroupMaintains370.0
AAPLCowen & Co.Maintains153.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com