Evercore: Estimating Apple’s regulatory overhang

From a note to clients by analyst Amit Daryanani that landed on my desktop Thursday:

ALL YOU NEED TO KNOW: This morning, the House Judiciary Committee advanced five antitrust bills designed to curb the power of big tech despite intensive lobbying by several of the companies the bills would affect. One bill among these, the American Choice and Innovation Online Act, is of particular relevance to AAPL. The bill would make it illegal for large tech companies to treat their own services preferentially vs. others on the platform in certain circumstances and would prevent platforms from interfering with business users’ prices or the ability of customers to interact with those business users, which has potentially significant implications for the App Store. (Though we don’t think AAPL’s strategy has impeded competition or driven a preference for AAPL apps vs. peers. If anything, it has given the consumer more choice)…

The bills seek to ban some current practices by these companies and offer regulators more tools to head off future anti-competitive practices. Should the American Choice and Innovation Online Act eventually make it through the House and Senate, there is a scenario where Apple is pressured to lower App Store fees, though the chances of the bill passing in its current form remain unclear. We estimate that should the App Store developer payout be raised from 70% to 95%, the company could see an ~11% hit to EPS. Should the payout be raised less steeply to 75%, the EPS impact could be as low as ~2%. [See chart below.]

Net/net: As [our head of U.S. Public Policy Sarah Bianch] also noted, the legislation may not move forward quickly, and the timing for a full House vote is uncertain, but it nonetheless magnifies the regulatory risk at AAPL, making this development worth watching.

Maintains Outperform rating and $175 target.

Below: The hit on Apple’s EPS if the share developers got paid was increased.

apple overhang evercore

My take: Stock buybacks have pushed Apple’s EPS so high it can afford a 2.1% cut. Hell, it can absorb a 10.7% cut.


  1. Jerry Doyle said:
    Successful antitrust busting requires support by the president, backing of public opinion, enforcement by respective federal agencies having oversight & SCOTUS. This effort at antitrust busting of Apple lacks public support. I question seriously that President Joe Biden will weigh in significantly, giving needed support to the effort. I also question seriously whether any anti-trust busting legislation against Apple receives needed blessing by a conservative bent SCOTUS.

    Joe Biden needs continued support by moderates, WS, the captains of industries & big business to be re-elected. What has not been mentioned on this blog is the passage of antitrust legislation requires backing by all players I denoted above to succeed: the public, the president, public opinion, enforcement by federal agencies & SCOTUS. In the absence of these bills even becoming law, I only see one factor above in play: federal agencies staffed by antitrust busting progressive administrators. Anyone who worked in government at the SES or agency head levels can tell you an agency director can do little if the Executive Branch isn’t giving its full blessing (and support). With Joe Biden needing to triangulate his way to re-election, I fail to see how he will forcefully back his federal agencies on antitrust enforcement. Just because a law may be on the books (and these bills are not even law) does not mean the Executive Branch enforces said law.

    This anti-trust movement by the current administration in no way is similar to the Teddy Roosevelt era where the effort then was received “wildly” among the populous & made the good president exceedingly popular. Additionally, Standard Oil & the big railroads all were engaged in price-cutting practices, collusive business deals, public misinformation & more shenanigans. None of the above applies to Apple today, especially in Apple’s attempt to be more public transparent & protective of its users’ privacy & security of their personal information. No, this anti-trust busting endeavor “lacks” public support. This fact needs to be communicated to Congressional Representatives. There is no public outcry targeting Apple.

    June 24, 2021
  2. Michael Goldfeder said:
    So Lina Khan, Vestager, Epic Games, Spotify, and an array of troglodyte politicians from around the globe want to tell me what ought to come preloaded on my iPhone? Or that it should come with nothing at all?

    What arrogant jackasses!

    June 24, 2021
  3. Fred Stein said:
    Don’t we have real problems? That impact real people?

    June 24, 2021
  4. Bart Yee said:
    As it stands, the only ones who truly benefit – if you follow the money, is the developers. You can bet $$$$ the would never pass on “savings” to customers/users but rather pocket the additional profits from reduced Apple commissions and also potential 3rd party app sales.

    But when the inevitable malware – Trojan horse – phishing – and remote bot data / password / financial harvesting sneaks in, all fingers will point towards and blame Apple, demanding help to fix bricked iPhones, and rescue developers / app stores who can’t / won’t curate even their own apps or up/downloads. They will claim “we’re only the distributors”, “but they told us the software was clean”, etc. caveat emptor!! As then users will demand Apple somehow “fix it!” Regardless of what government hindrances have been legislated in.

    June 25, 2021
  5. Steven Philips said:
    Bart: that’s also the lie behind “right to repair”.
    “It doesn’t work!” “No, really, I didn’t do anything!”
    “Prove it!”

    June 25, 2021

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