Google parent Alphabet (GOOGL) was hit with a downgrade by Wedbush on views that Apple (AAPL), Amazon.com (AMZN), eBay, Alibaba Group (BABA) and others could disrupt its fast-growing mobile advertising business.
James Dix, an analyst at Wedbush, downgraded Google to underperform, with a price target of 700.
Dix says Apple, Amazon, eBay (EBAY) and Alibaba are among companies that can use their e-commerce or digital payment systems to get in the way of Google's advertising-based search business.
Apple has filed patent applications for a digital wallet service that would pay users to view advertisements, notes Dix in his research report. Many consumers search for products on Amazon's website rather than initially searching on Google, he noted.
"For products where Amazon and eBay do a lot of business, they have essentially usurped the top spot as the place for commercial searches from Google … . (T)hey might well consider adding paid attention features," said Dix. "Alibaba, whose largest revenue source is advertising, has highlighted the potential profitability from the convergence between advertising and commerce."
Google stock edged down a small fraction, to 810.06, in the stock market today.
IBD'S TAKE: Google stock has been in a trading range since it reported Q2 earnings and has failed to break out amid views it faces tough year-over-year comparisons after launching new ad products in Q3 2015. Amazon is an IBD Leaderboard stock, while Alibaba belongs to the IBD 50.
The Wedbush report says ad blockers, credit-card companies, marketing communications services firms, rewards platforms and telecom operators also could steer consumers away from Google's search engine.
"We see the risk to Google's mobile search advertising more in terms of competition from other platforms and business models than from more direct search advertising competitors," Dix wrote.
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