As Apple Battles DOJ Antitrust Claims, Analysts Compare It With Microsoft's Past, Seeing AI Opportunities

Wedbush analyst Daniel Ives maintained an Outperform rating on Apple Inc AAPL with a price target of $250.

The Department of Justice brought forth its long-anticipated case against Apple for violating antitrust laws, which has been brewing for years on the back burner since 2019. 

Effectively, a kitchen sink case built up against Apple, although he noted this case would last for years, and ultimately, a settlement in some form likely over the next 12 to 18 months. 

This case escalates the Biden Administration’s antitrust efforts against Big Tech giants and adds to the ongoing antitrust case against Google and other cases against Meta and Amazon.

The analyst does not expect any business model changes for Apple now as this case will likely take years in the courts to prosecute and lead to a conclusion. 

Still, Apple has to find a way to eventually settle this case, pay a hefty fine, and ultimately find some compromise with developers on the App Store structure down the road.

Ives projected second-quarter revenue and EPS of $90.3 billion and $1.54.

Morgan Stanley analyst Erik W Woodring reiterated an Overweight rating with a price target of $220.

The analyst noted a positively skewed risk-reward at these levels and believes upcoming Generative AI announcements can more than offset other, commonly cited, investor concerns (China demand, DOJ lawsuit) to catalyze outperformance.

He noted the market under-appreciating Apple’s Edge AI initiatives and sees key catalysts ahead, including WWDC & an AI-driven iPhone upgrade cycle, which should more than offset June quarter estimate concerns and the long-tailed DOJ lawsuit.

Woodring projected second-quarter revenue and EPS of $89.9 billion and $1.48.

Evercore ISI analyst Amit Daryanani maintained an Outperform rating with a price target of $220.

The DOJ has filed its long telegraphed suit against Apple, and it will doubtless be a long process that will produce negative headlines, but the analyst expected Apple to prevail in the end. 

He noted any meaningful antitrust action against Apple in the U.S. will require new legislation from Congress as existing laws make it very difficult to argue Apple operates a monopoly using market definitions or consumer harm standards. 

The Epic Games lawsuit attacked similar angles and was struck down because the judge would not define iOS as a single market. Apple does not have a monopoly on the broader smartphone or digital gaming markets, he highlighted. 

The first round of litigation will depend on the judge, but it will be tough for the DOJ to prevail up the court system as the courts get more business-friendly, with the current Supreme Court being the most favorable, per the analyst. 

He added that the initial lawsuit will likely take 2-3 years to conclude, followed by ~1 year for the appeals process. 

Daryanani noted the antitrust as more of a headline risk than a financial risk in the U.S. If new legislation comes into effect, Apple will likely be able to change its App Store fee or third-party App Store policies meaningfully.

Upon initial reading, Rosenblatt analyst Barton Crockett noted that the DOJ’s antitrust lawsuit versus Apple makes some riveting claims that Apple has abused monopoly power to protect its dominant market position. 

He, for now, withheld judgment, as Apple will have its day in court. However, he noted that the suit appears to lean much more towards behavioral remedies than a breakup, which is helpful for Apple’s equity, judging by Microsoft Corp’s MSFT experience.

Apple’s stock has gained over 9% in the last 12 months. Analysts can gain exposure to the stock via Fidelity MSCI Information Technology Index ETF FTEC and IShares U.S. Technology ETF IYW.

Price Action: AAPL shares traded higher by 0.68% at $172.53 on the last check Friday.

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