Apple (AAPL) to Testify at Senate Hearing on Antitrust Issues

Zacks Equity Research
·5 min read

Apple AAPL will make Chief Compliance Officer Kyle Andeer the company’s representative to speak to the Senate Judiciary Committee’s Subcommittee on Competition Policy, Antitrust and Consumer Rights on Apr 21, per a Reuters report.

Last week, Senators Amy Klobuchar, a Democrat, and Mike Lee, a Republican strongly urged Apple to provide a witness for an upcoming hearing on App Store and digital competition.

Since last year, the Justice Department’s antitrust division has been investigating Apple’s App Store practices over concerns that the company’s way of doing business hurts consumers by limiting choice and innovation and keeping prices high.

Apple’s App Store has been facing backlash from third-party developers over mandatory revenue sharing payments and strict inclusion rules set by the App Store for iPhones and iPads. Currently, Apple is embroiled in an antitrust lawsuit with Epic Games, which goes to trial in early May.

Markedly, Apple’s shares have returned 0.2% year to date compared with the Zacks Computer - Mini computers industry’s growth of 1.3%. The lag in performance can be attributed to delayed production of some of its Macs and iPads due to chip shortage, while supply of certain components for iPhones remains tight.

Year to Date Performance

Apple’s Rigorous Efforts to Aid Developers Globally

Markedly, Apple’s robust developer base of more than 28 million has been instrumental behind the growth of App Store traffic. Apple garnered more than 620 million paid subscribers across its Services portfolio at the end of first-quarter fiscal 2021.

The company is set to host its annual Worldwide Developers Conference 2021 (WWDC 2021) between Jun 7 and 11. Apple is not only expected to provide updates on its software at this year’s conference but also rumored to make hardware announcements, particularly related to Mac.

This Zacks Rank #3 (Hold) company has been striving hard to close off the loopholes that developers find in order to bypass some of the in-game purchases that have to be made through the App Store. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Apple has reduced its App Store commission fee from 30% to 15% on paid apps and in-app purchases for small developers who earn less than $1 million in annual sales from their apps and those who are new to the store effective Jan 1, 2021.

As part of Apple’s new App Store Small Business Program, the new commission structure is aimed at supporting small and individual developers as businesses adapt to a virtual world amid the coronavirus pandemic.

Globally, consumer spending on the App Store reached $72.3 billion in 2020, up 30.3% year over year, which exceeded the amount users spent on Alphabet’s GOOGL Google Play, which grew 30% year over year to $38.6 billion. Markedly, the App Store generated 87.3% more in consumer spending than the Play store, per a Sensor Tower report.

Other Tech Giants at the Center of Antitrust Target

Antitrust laws have been making a splash because of the lawsuits against big tech giants like Facebook FB, Google, Amazon AMZN and Apple, among many others. They are claimed to have been engaged in anticompetitive, monopoly-style tactics to maintain their dominance in e-commerce, smartphones, social networking and search.

Google is facing similar antitrust probe as Apple over competition issues related its Play Store. Markedly, the company has already agreed to testify at the hearing alongside Apple.

Last month, Facebook challenged the Federal Trade Commission’s (FTC) lawsuit, which questions the social media giant’s 2012 acquisition of Instagram for $1 billion and the subsequent 2014 acquisition of WhatsApp for $19 billion.

FTC claims such buyouts to be a strategy to neutralize the threat on Facebook’s monopoly power over social media. It further states that for future deals, Facebook will need to seek prior approval of FTC.

Of late, merchant groups called Small Business Rising are forming a national coalition across the United States to promote stronger antitrust laws against Amazon. These groups, which collectively represent thousands of businesses, are urging for federal legislation that would prevent Amazon, the owner of a dominant online marketplace, from selling its own products in competition with other sellers, a policy that could effectively separate Amazon’s retail product business from its online marketplace.

Although the ongoing antitrust probe is a headwind for Apple, it is not expected to impact the company’s top line and demand for its services portfolio, atleast in the near term.

Apple has benefited from coronavirus-induced strong sales of iPad and Mac. The company is heavily dependent on its flagship product, the iPhone, for growth. Success of the latest iPads and Macs suggests an expanding portfolio that bodes well for growth.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

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