The big tech universe has been under investigation over its market power for a long time, and pressure has escalated in recent weeks. Last week, the House Judiciary Committee’s Antitrust Subcommittee passed six Big Tech bills to restrict ownership, to some extent, of the online platforms of big tech giants, including Facebook (FB), Google (GOOGL), Amazon (AMZN), and Apple (APPL).
“With this package of historic legislation, we have the opportunity to take control of our own destiny to be a global leader in developing rules of the road for the digital economy,” Judiciary Committee chair Jerry Nadler said. “We cannot be complacent and we cannot delay,” he added.
Commenting on these developments, Monness analyst Brian White said that certain bills will be more impactful than others for the tech giant Apple. He believes the “Ending Platform Monopolies Act” and the “American Choice and Innovation Online Act” will impact Apple significantly.
White said, “A changing political landscape places Apple in a more vulnerable position than in past years and adjustments may be required; however, we believe the company remains that ‘shining city upon a hill’ in the Big Tech universe.”
The analyst believes that specifically for Apple, the power of the App Store and Apple’s preinstalled proprietary app strategy are key antitrust issues. Notably, Epic Games and Spotify (SPOT) have remained vocal critics of the App Store, while Netflix (NFLX), among others, has refrained from offering new subscriptions on the platform.
Since its inception, the App Store has turned out to be triumphant, bringing in huge profits. The 5-star analyst believes that the change in the political landscape, escalating suspicion among people regarding Big Tech, and the need to promote third-party app innovation are viable reasons for Apple “to adjust App Store commissions to more reasonable levels and modify policies.”
Apple might have to alter its modus operandi as it relates to preinstalled proprietary apps, White added.
The analyst estimates that these adjustments consequentially will reduce profits of the App Store. At the same time, its popularity in the premium device market and a growing services portfolio will aid Apple in sailing through this new environment. (See Apple stock chart on TipRanks)
White is also concerned about the deteriorating relationship with China given “the U.S. Government’s more hawkish stance toward China in recent years, complete with tougher trade policies and bans on certain tech companies.” Therefore, Apple might be in more trouble, as it has achieved a high rate of success in China.
Furthermore, the analyst maintains that escalating political and societal issues of varied countries, and the need to abide by the laws of different countries, will not leave Apple unscathed.
Nevertheless, based on Apple’s strong product portfolio and service business along with a pipeline of innovations, White maintained a Buy rating and a price target of $180 (28.6% upside potential) on the stock.
Consensus among analysts is a Moderate Buy based on 18 Buys, 3 Holds, and 1 Sell. The average Apple price target stands at $162.76 and implies upside potential of 16.29% to current levels. Shares have gained almost 50% over the past year.
Bloggers Weigh In
TipRanks data shows that financial blogger opinions are 89% Bullish on AAPL, compared to a sector average of 68%.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your analysis before making any investment.
