Robust sales of 5G iPhones and services such as the Apple Music and App Store are expected to grow at Apple Inc (AAPL.O). The service business is subject to litigation from the U.S. Department of Justice. Also, pending legislation in the United States and Europe will reduce their commissions on applications and make further changes.
“We believe that government action (with antitrust, executive order, and legislation) represents one major risk to Apple’s shares,” said Tom Forte, an analyst at D. Davidson & Co, who wrote the letter to clients and added that he hoped Apple’s management would address the risks posed by the company’s revenue today.
Effect on Sales
Analysts expect Apple’s service sales to extend by 24.1% to $ 16.33 billion, almost a fifth of the entire sales revenue of $ 73.30 billion, consistent with IBES data from Refinitiv from July 26.
Epic Games sued Apple for its commissions on the App Store in 2020. Cowen & Co analyst Krish Sankar estimated that this happened because the Apple App Store was offering about 6% of its total revenue and out of 10 % and 15% of its profit.
Risks Faced by Apple
Apple also faces the risk that the U.S. Department of Justice can bar Google’s Alphabet Inc (GOOGL.O) from paying as a search engine on the iPhone, Angelo Zino of CFRA Research wrote in a research book last week. Officials from the Department of Justice have pointed out the limit on Google paying Apple $ 8 billion to $ 12 billion a year.
Projection of iPhone Sales
Meanwhile, analysts expect the company to see an increase in iPhone sales in its third-quarter financially, with sales rising by 28.7% to $ 34 billion, according to Refinitiv data from July 26, the largest contributor to sales.
JP Morgan analyst Samik Chatterjee wrote in a letter last week that the growth of Apple’s business led to a turnaround in the company’s high value, with shares trading at around $ 30. As recently as 2019, stocks have been trading regularly for less than 20 times as investors have always been cautious about the company’s high reliance on iPhone sales.
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