I think there is sufficient reason to believe that Alphabet (NASDAQ:GOOG,GOOGL) stock will remain down, regardless of how its Feb. 1 earnings report goes.
On the one hand, yes, I am referring to the continued tech sell off. Overly high valuations combined with rising interest rates set the table for declining prices across tech. That is part of the reason Google is off as of late. But I am not referring to only that.
Rather, I am referring to a few lawsuits that could spell real trouble for the firm.
Tracking Concerns Mount
Earlier this week, the District of Columbia and three states; Texas, Indiana, and Washington, sued Google. Those jurisdictions are suing Google over what they characterize as deceptive location practices that jeopardize user privacy.
The lawsuits cite a 2018 Associated Press article that alleged Google continued to track user location data when settings were disallowed. According to the article: “The company claimed that turning that setting off would stop any location tracking when in reality there was a separate setting, called ‘Web & App Activity’, that continued to log location and other personal data.”
Back in 2018, Arizona filed a similar lawsuit against Google which is still pending. So, there is clear precedent for such continued accusations against Google. Further, given that four states and the District of Columbia now have filed similar lawsuits, it could open a floodgate. Who knows, perhaps this will provide the impetus for multiple other states to do similarly.
Google Had Impetus to do So
You may ask yourself, if this is true, why would Google take such a risk in order to continuously track users? Location data is part of Google’s advertising business from which it derives significant revenue. Users who turn off their location data essentially stop dollars from flowing in.
So, if the assertions are true, Google certainly had reason to take such bold steps. Google has, of course, been subject to multiple high-profile lawsuits in the past.
The difference is that President Joe Biden and his team have pledged to crack down on big tech, specifically on data gathering issues. That doesn’t mean anything definitive is happening, but it shades in the direction of the possibility.
And the data tracking lawsuits aren’t the only ones on Google’s plate.
California Lawsuit
It isn’t news that Google pays Apple (NASDAQ:AAPL) serious sums of money in order for Google to be the default search engine on its products. In other words, it partakes in anti-competitive behavior. In essence, Google is paying Apple not to compete in the search business.
The interesting thing about this latest lawsuit is that it could shed light on the exact amount Google pays Apple. If the trial reaches the discovery process, then the facts will be revealed. Current suggestions are that the payments could be between $18 to $20 billion this year.
The odds that this lawsuit makes it very far are slim based on precedents. However, there is the chance that something different happens this time.
But I think it is at least something to begin to mull over. Based on its fundamentals, GOOG stock is a perennial buy. It is currently down in price, so the natural instinct is to pounce at the opportunity. Google always seems to bounce back and lawsuits seem to slide off.
What to do With GOOG Stock
I have no evidence that points to anything different happening this time. However, given the tech sell off, I suggest staying away from Google despite the lower prices. Maybe President Biden will put together more resources and gets serious about a tech crackdown. It seems unlikely to amount to much, but then again, it might.
Anyway, investors have to believe that someday the tech elite will suffer a changing tide that leads to regulatory crackdowns and real punishment. It might not be today, but given the current volume of litigation, I’d stay away.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.
