iPhone could boost Apple sales, but App Store faces regulatory risks

iPhone could boost Apple sales, but App Store faces regulatory risks

For Stephen Nellis

Jul 27 (Reuters) – Strong sales of the iPhone with 5G technology and services like the App Store and Apple Music are expected to fuel growth at Apple Inc, which reports its quarterly results on Tuesday, but some investors want to see the company’s strategy. company to protect itself from antitrust rules.

Apple’s services business faces lawsuits, regulatory scrutiny – including the US Department of Justice – and a series of laws in the US and Europe to reduce its application fees and make other changes.

“We believe that government action (via antitrust measures, decrees and legislation) represents the greatest risk to Apple’s stock,” DA Davidson & Co analyst Tom Forte wrote in a note to clients, adding that he expected executives address risks in the company’s earnings report.

Analysts expect to see Apple’s service sales rise 24.1% to $ 16.33 billion, more than a fifth of its total forecast sales of $ 73.3 billion, according to IBES data from Refinitiv as of July 26. .

Last year, when Fortnite developer Epic Games sued Apple for App Store commissions, Krish Sankar, an analyst at Cowen & Co, estimated that the App Store contributes 6% to the company’s total revenue, while which is responsible for between 10% and 15% of your earnings.

Apple also faces the risk that the US Department of Justice will ban payments from Google, owned by Alphabet Inc, to be the default search engine on the iPhone, wrote Angelo Zino of CFRA Research.

Justice Department officials have cited estimates that Google pays Apple between $ 8 billion and $ 12 billion a year.

For now, analysts expect the company to see iPhone sales boom in its fiscal third quarter, rising 28.7% to $ 34 billion, according to Refinitiv data as of July 26, by far the largest. individual contributor to sales.

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