Evaluating Apple (AAPL) After Epic Antitrust Decision

The Apple Inc. (AAPL) App Store lives on, although with different payment options, and Apple is not a monopoly. These are the main takeaways from U.S. District Judge Yvonne Gonzalez Rogers'decision in the antitrust suit brought on by Fortnite maker Epic Games, which is appealing the case.

The suit began after Apple removed Fortnite from the App Store. This came after Epic inserted a link to its own payment system in Fortnite, violating its development agreement. Epic purposely sidestepped Apple's in-app payment system, which takes an estimated 15% to 30% cut from all in-app transactions on iOS devices like iPhones. This generates billions in revenue annually.

Judge Rogers sided with Epic on the payment system complaint, but other major decisions in the case went Apple's way. Her definition of the market in the case as digital mobile gaming transactions, rather than the entire iOS ecosystem as Epic hoped, seems to have laid the foundation for a "no monopoly" decision (but I'm no legal expert!). Still, she said that Apple was close to monopoly power in that market.

As a result, future changes to the App Store may be in order. Legislative interest may force changes too. So, how does that potentially affect Apple stock? 

While an antitrust case is serious, and this certainly seems like a big deal, it may not be too much of an issue for the stock's overall performance. Let's keep in mind that, per my estimates in the "legislative interest" link above, App Store revenue may be about 5% of total revenue.

Of course, it could grow. But as is, this decision's impact on overall revenue and growth should be minimal, especially over time. Big Money investors know that. 

I look at when I believe institutional investors trade stocks. I call them Big Money signals. I don't think these market movers are too worried about the recent ruling over the long haul. To get a real sense of what Big Money really thinks about Apple, let's broaden our horizons.

Below is a chart for Apple going back to 2017. I've notated the times when Big Money pushed into the shares. The way I see it, the more Big Money, the better.

The activity in the above chart shows how big money, over time, loves Apple stock. Given the fundamentals, demonstrated growth, and future potential, it's hard not to concur. Sure, the stock has had rough patches. But zoom out, and it's clear that this stock's had somewhere to be—UP.

Now, the antitrust suit is obviously important. But even if the App Store were marginalized by other options on iOS devices, it's highly probable that the potential impact on overall revenue is small.

And who knows? The company could innovate this situation into a positive, perhaps creating a new, profitable payment arrangement or something entirely unique. Also, don't discount the possibility that Apple could end up a winner through market forces.

The Bottom Line

Apple received a mixed verdict in its recent antitrust case (the App Store payment system may be in trouble, but the judge doesn't consider the company a monopoly). But even in a worst-case scenario, it's likely that there could be only a minimal effect on the overall business.

From where I stand, Big Money senses this and is focused more on the long-term fundamentals and growth potential. What say you?

Disclosure: The author holds no position in AAPL at the time of publication.