Dow component Apple Inc. (AAPL) fell 3.3% on Friday after the U.S. District Court in Northern California found the tech icon in violation of the state’s Unfair Competition Law and issued an injunction that allows developers to place external links at the Apple store, enabling them to bypass the company’s formerly-exclusive payment system. The news may have been anticipated because the stock fell more than 2% in the two sessions ahead of the ruling.
Barrage of Anti-Trust Complaints
The injunction will have a material impact on earnings because it permanently restrains Apple from “prohibiting developers from (i) including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchasing and (ii) communicating with customers through points of contact obtained voluntarily from customers through account registration within the app”.
Big tech faces a barrage of anti-trust complaints in the next year, mostly originating from an increasingly hostile Congress. Apple and other mega-caps have been using their immense footprints to grab market share and increase profits, igniting the wrath of those dependent on their ecosystems. Plaintiff Epic Games CEO Tim Sweeney summed up this anger, noting “Today’s ruling isn’t a win for developers or for consumers. Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers.”
Wall Street and Technical Outlook
Wall Street consensus is mixed after 2020’s outsized 81% return, yielding an ‘Overweight’ rating based upon 27 ‘Buy’, 5 ‘Overweight’, 10 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets now range from a low of $90 to a Street-high $190 while the stock closed Friday’s session about $20 below the median $169 target. The court decision may force analysts to revisit spreadsheets, suggesting that Apple is more than fully-valued.
Apple mounted the January 2020 peak at 81.96 in June, entered a powerful uptrend that flamed out in the upper 130s in September. A January 2021 breakout failed, adding to rangebound action, ahead of a summer advance that added just 20 points to the 2020 high before turning tail last week. Unfortunately, accumulation readings have failed to confirm the mid-year breakout, exposing downside that could reach the 200-day moving average near 130 in the fourth quarter.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.
This article was originally posted on FX Empire
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