Possible cost for Apple's stock tariffs, antitrust regulations

Apple faces two major threats to its bottom line, namely tariffs and antitrust, and Morgan Stanley said Wednesday that the pressure created by the government could be expensive for the technology giant.

In its worst case scenario, Morgan Stanley estimates that the two external factors would drop Apple's stock price to $ 147, which would reduce the market value by more than $ 150 billion from its current price. Morgan Stanley has a "base case" for Apple of $ 231 per share, but tariffs could take up to $ 71 per share, while antitrust regulations could cut $ 13 per share.

"The badessment of our bearish case now fully takes into account the impact of more restrictive trade measures between the US and China, as well as the worst regulatory consequences, which will result in a valuation of 147." dollars, "said Morgan Stanley badyst, Katy Huberty, to investors.

Apple's stock has already been affected this year by the imminent tariffs on imported products from China. Sales in China accounted for 16.6% of Apple's business turnover in the first half of 2019. Apple shares had their worst week in 2019 in May, growing fear of new Trade taxes have discouraged Apple's investors.

Huberty's memo focused on recent reports that the Department of Justice could investigate Apple for anti-competitive behavior. Morgan Stanley believes that an antitrust investigation related to Apple would probably be centered on the App Store, she said.

According to Huberty, the main focus of the investigation is that Apple "is already facing a potential investigation in the European Union after Spotify has accused Apple of anticompetitive actions by favoring Apple Music at detrimental third-party applications EU prosecutors have not yet announced take action, the scrutiny sets a precedent.

In the US, the Apple app store has already been under a microscope, as Huberty pointed out, "the Supreme Court has recently ruled that consumers can sue antitrust against Apple because the price increase of the application stores ". In addition, Senator Elizabeth Warren recently implicated Apple in an interview about her proposal to dismantle major technology companies. Warren hinted that she thought "that Apple should not be allowed to operate an application store platform and offer its own products on the platform," Huberty said. .

If regulators take action against Apple, Morgan Stanley thinks they would probably target Apple's Music, iTunes or the company's App Store. On its own, the company estimates that Apple Music is worth nearly $ 13 billion in case of sale, or about $ 3 per share at current prices. With iTunes, this total value rises to $ 39.3 billion, or $ 9 per share.

But regulators could target the App Store instead, said Huberty, and in "an extreme scenario", the company could halve its share of developers. If Apple's commission rate was reduced by 50%, Huberty said: "Apple's take rate from [calendar year 2020] would be equivalent to a loss of $ 9.5 [billion] and $ 13 [a share in] lower valuation. "Morgan Stanley estimates that a 50%" subscription rate "for the App Store is worth $ 60.8 billion in stock value for Apple.

These antitrust scenarios are hypothetical until the Department of Justice announces an action. Apple CEO Tim Cook went on the offensive earlier this week, saying in an interview that he did not think "anyone who is reasonable will come to the conclusion that Apple is a monopoly" .

"We do not have a dominant position in any market," Cook added.