Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Apple's iPhone expected to drive sales, but App Store faces regulatory risk

Stock Markets Jul 27, 2021 07:26AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: The Apple Inc logo is shown outside the company's 2016 Worldwide Developers Conference in San Francisco, California, U.S. June 13, 2016. REUTERS/Stephen Lam/File Photo
 
GOOGL
+2.44%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AAPL
-1.87%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
GOOG
+2.54%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Stephen Nellis

(Reuters) - Strong sales of 5G iPhones and services such as the App Store and Apple Music are expected to drive growth at Apple Inc (NASDAQ:AAPL), which reports results on Tuesday, but some investors will be listening to the company's strategy to ward off anti-trust foes.

The services business faces lawsuits, regulatory scrutiny, including from an empowered U.S. Department of Justice, and a raft of pending legislation in the United States and Europe to lower its commissions on apps and make other changes.

"We believe government action (via antitrust, executive order, and legislation) represents the single greatest risk for shares of Apple," Tom Forte, an analyst at D.A. Davidson & Co, wrote in a note to clients, adding that he hoped Apple's executives would address the risks on the company's earnings call on Tuesday.

Analysts expect Apple's services sales to rise 24.1% to $16.33 billion, more than a fifth of its expected overall sales of $73.30 billion, according to IBES data from Refinitiv as of July 26.

Last year, when "Fortnite" maker Epic Games sued Apple over its App Store commissions, Cowen & Co analyst Krish Sankar estimated that Apple's App Store provides about 6% of its overall revenues and between 10% and 15% of its profits.

Apple also faces the risk that the U.S. Department of Justice could bar Alphabet (NASDAQ:GOOGL) Inc's Google paying to be the default search engine on the iPhone, Angelo Zino of CFRA Research wrote in a research note last week. Justice Department officials have cited estimates that Google pays Apple $8 billion to $12 billion per year.

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

J.P. Morgan analyst Samik Chatterjee wrote in a note last week that Apple's services business growth has driven a structural shift a higher valuation for the company, with shares trading near 30 times earnings. As recently as 2019, shares consistently traded at less than 20 times earnings as investors remained cautious about the company's heavy dependence on iPhone sales.

Apple's iPhone expected to drive sales, but App Store faces regulatory risk
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email