Post by Dave on Nov 3, 2020 3:22:14 GMT -8
Good morning, it’s Election Day. The pre-market is green at +$0.81 at the moment. What will this day hold?
Morgan Stanley: Apple’s 2020 10-K highlights government regulatory risks
There’s a good discussion in the comments section:
Morgan Stanley: Apple’s 2020 10-K highlights government regulatory risks
Risk factors broaden to include potential adverse implications from heightened legal and regulatory investigations. Apple made notable changes to its risk factors, particularly around potential pressure on App Store commission and Services gross margin.
Specifically, Apple notes the potential risk of reduced, narrowed or eliminated App Store take rates, which could have material adverse impacts on Apple’s financial condition and operating results. Previously the risk factor focused on the risk of developers reducing their use of App Store.
Apple also specifically added ‘Services’ to the risk that gross margins can vary significantly and can change over time. We believe these changes stem from the heightened regulatory focus on App Store and large technology companies broadly. On this point, Apple added a risk that the outcome of litigation or government investigations could impact Apple’s relationships with business partners which could have a material adverse impact on Apple’s financials, likely alluding to the Google risk.
Legal and regulatory investigations take time and we believe both Apple and Google have strong arguments in defense of App Store take rates and Google’s licensing fee, respectively. So while it’s important to monitor developments on these fronts, we don’t view it as a material near to medium term risk to Apple’s Services business.
Maintains Overweight rating and $136 price target.
Specifically, Apple notes the potential risk of reduced, narrowed or eliminated App Store take rates, which could have material adverse impacts on Apple’s financial condition and operating results. Previously the risk factor focused on the risk of developers reducing their use of App Store.
Apple also specifically added ‘Services’ to the risk that gross margins can vary significantly and can change over time. We believe these changes stem from the heightened regulatory focus on App Store and large technology companies broadly. On this point, Apple added a risk that the outcome of litigation or government investigations could impact Apple’s relationships with business partners which could have a material adverse impact on Apple’s financials, likely alluding to the Google risk.
Legal and regulatory investigations take time and we believe both Apple and Google have strong arguments in defense of App Store take rates and Google’s licensing fee, respectively. So while it’s important to monitor developments on these fronts, we don’t view it as a material near to medium term risk to Apple’s Services business.
Maintains Overweight rating and $136 price target.
There’s a good discussion in the comments section:
Robert Paul Leitao said:
Anyone see a real risk to Apple on a near-term basis from regulatory or antitrust scrutiny?
Apple is prudently advising of potential risks in its regulatory filings. I agree with Katy Huberty the risk may not be material in the near term. However, Washington’s anti-trust priorities may soon change and the EU is also looking at Apple’s practices and strategic approach to its fastest-growing revenue segment. For competitive reasons Apple may also adjust its distribution fees and policies over time.
Investigations do take time and in my view it would be challenging for any party to legitimately claim Apple has abused a dominant market position and is adversely suppressing competition and through the company’s practices is stifling innovation. In my view, reading these risk factors in the company’s 10-K can be unsettling. However, revealing potential risk factors is necessary to comply with regulations.
Anyone see a real risk to Apple on a near-term basis from regulatory or antitrust scrutiny?
Apple is prudently advising of potential risks in its regulatory filings. I agree with Katy Huberty the risk may not be material in the near term. However, Washington’s anti-trust priorities may soon change and the EU is also looking at Apple’s practices and strategic approach to its fastest-growing revenue segment. For competitive reasons Apple may also adjust its distribution fees and policies over time.
Investigations do take time and in my view it would be challenging for any party to legitimately claim Apple has abused a dominant market position and is adversely suppressing competition and through the company’s practices is stifling innovation. In my view, reading these risk factors in the company’s 10-K can be unsettling. However, revealing potential risk factors is necessary to comply with regulations.