Musk threatens Apple with legal action over App Store bias towards OpenAI
On Monday, Evercore ISI reaffirmed its positive stance on Apple Inc. (NASDAQ:AAPL), maintaining an Outperform rating and a price target of $250.00. The firm’s analyst highlighted the importance of Apple’s Services business, which has been a key factor in the company’s valuation and growth. With a market capitalization of $3.16 trillion and an EBITDA of $138.9 billion in the last twelve months, Apple continues to demonstrate its market dominance. The analyst pointed out that while the Services segment faces legal and technological challenges, it remains central to Apple’s recent multiple rerating. According to InvestingPro analysis, Apple currently appears overvalued based on its Fair Value calculations.
The main risks to Apple’s Services revenue were identified as regulatory issues affecting the App Store and potential changes to the default search engine payment from Google (NASDAQ:GOOGL). The App Store represents 2% of Apple’s revenue and 6% of its earnings per share (EPS), while the Google payment accounts for 6% of revenue and 16% of EPS. With total revenue of $400.4 billion and a robust gross profit margin of 46.6%, Apple maintains a strong financial position despite these challenges. The bear case scenario suggests that if Apple were to lose its U.S. Google payment and App Store revenue, there could be an approximate 20% hit to EPS, potentially leading to a stock price of $144. Conversely, the bull case scenario assumes Apple successfully appeals the Epic case, thereby avoiding any impact on the App Store, and that the Department of Justice does not interfere with the Google payment. Additionally, the potential for AI technology to be overstated could allow Apple to capitalize on AI search, supporting the Services segment as a growth driver. InvestingPro subscribers can access 12 additional key insights about Apple’s financial health and growth prospects.
The analysis also postulated that a strong iPhone cycle, with increased average selling prices, could elevate fiscal year 2026 earnings to $9 per share, which could value the stock at $300, aligning with the current analyst high target. With a current diluted EPS of $6.40 and analyst consensus forecasting $7.22 for FY2025, this projection represents significant growth potential. The analyst concluded by noting the negative sentiment among investors towards Apple and suggested that favorable outcomes in court cases or tariff issues could provide a significant boost to the stock. For detailed analysis and comprehensive valuation metrics, investors can access Apple’s full Pro Research Report on InvestingPro.
In other recent news, Apple Inc. has announced a suite of new accessibility features, including Accessibility Nutrition Labels on the App Store and a Magnifier app for Mac. These updates are designed to enhance user experience for individuals with disabilities and are expected to roll out later this year. In a separate development, Apple is reportedly working on an AI-based battery management mode for its upcoming iOS 19, aimed at improving iPhone battery life by analyzing user behavior to optimize energy usage. Additionally, Apple has blocked access to the popular video game "Fortnite" on iPhones globally, a move affecting users in the United States and the European Union. Meanwhile, KeyBanc Capital Markets maintained a Sector Weight rating on Apple stock, citing concerns over high growth expectations, stagnant upgrade rates, and increased competition in China. Legal challenges related to the Google Department of Justice lawsuit and potential changes to the App Store also contribute to the firm’s cautious outlook. Furthermore, President Donald Trump expressed disapproval of Apple’s production shift to India, following a conversation with Apple CEO Tim Cook. Despite these challenges, Apple continues to focus on technological advancements and accessibility innovations.
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