Singapore markets open in 4 hours 12 minutes
  • Straits Times Index

    3,048.05
    -15.15 (-0.49%)
     
  • S&P 500

    4,395.64
    +41.45 (+0.95%)
     
  • Dow

    34,258.32
    +338.48 (+1.00%)
     
  • Nasdaq

    14,896.85
    +150.45 (+1.02%)
     
  • BTC-USD

    43,456.16
    +2,355.48 (+5.73%)
     
  • CMC Crypto 200

    1,088.81
    +48.33 (+4.64%)
     
  • FTSE 100

    7,083.37
    +102.39 (+1.47%)
     
  • Gold

    1,767.70
    -10.50 (-0.59%)
     
  • Crude Oil

    71.97
    +1.48 (+2.10%)
     
  • 10-Yr Bond

    1.3360
    +0.0120 (+0.91%)
     
  • Nikkei

    29,639.40
    -200.31 (-0.67%)
     
  • Hang Seng

    24,221.54
    +122.40 (+0.51%)
     
  • FTSE Bursa Malaysia

    1,529.02
    -1.42 (-0.09%)
     
  • Jakarta Composite Index

    6,108.27
    +47.51 (+0.78%)
     
  • PSE Index

    6,890.73
    +9.53 (+0.14%)
     

Apple's iPhone expected to drive sales, but App Store faces regulatory risk

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·2-min read
FILE PHOTO: IPhone 12 phones are seen at the new Apple Store on Broadway in downtown Los Angeles
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

By Stephen Nellis

(Reuters) - Strong sales of 5G iPhones and services such as the App Store and Apple Music are expected to drive growth at Apple Inc, which reports results on Tuesday, but some investors will be listening to the company's strategy to ward off anti-trust foes.

The services business faces lawsuits, regulatory scrutiny, including from an empowered U.S. Department of Justice, and a raft of pending legislation in the United States and Europe to lower its commissions on apps and make other changes.

"We believe government action (via antitrust, executive order, and legislation) represents the single greatest risk for shares of Apple," Tom Forte, an analyst at D.A. Davidson & Co, wrote in a note to clients, adding that he hoped Apple's executives would address the risks on the company's earnings call on Tuesday.

Analysts expect Apple's services sales to rise 24.1% to $16.33 billion, more than a fifth of its expected overall sales of $73.30 billion, according to IBES data from Refinitiv as of July 26.

Last year, when "Fortnite" maker Epic Games sued Apple over its App Store commissions, Cowen & Co analyst Krish Sankar estimated that Apple's App Store provides about 6% of its overall revenues and between 10% and 15% of its profits.

Apple also faces the risk that the U.S. Department of Justice could bar Alphabet Inc's Google paying to be the default search engine on the iPhone, Angelo Zino of CFRA Research wrote in a research note last week. Justice Department officials have cited estimates that Google pays Apple $8 billion to $12 billion per year.

For now, analysts expect the company to see a boom in iPhone sales for its fiscal third quarter, with sales rising 28.7% to $34 billion, according to Refinitiv data as of July 26, by far the largest single contributor to sales.

J.P. Morgan analyst Samik Chatterjee wrote in a note last week that Apple's services business growth has driven a structural shift a higher valuation for the company, with shares trading near 30 times earnings. As recently as 2019, shares consistently traded at less than 20 times earnings as investors remained cautious about the company's heavy dependence on iPhone sales.

(Reporting by Stephen Nellis in San Francisco; editing by Peter Henderson and Richard Pullin)

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting