JPMorgan Comments on Apple (AAPL) Changes to EU Services Monetization
JPMorgan analyst William Yang reiterated an Overweight rating on Apple (NASDAQ: AAPL).
The analyst comments "Apple will enable alternative app stores for consumers to download apps, and the ability to use alternative payment systems starting March of this year. Apple is charging a lower commission rate in the range of 10% to 17% (vs. prior rates of 15% to 30%) for apps sold through the Apple App Store. However, Apple is establishing a €0.50 cent fee on all apps (first annual download per year once above 1 mn downloads), including free apps as well as apps both in the Apple App Store and in alternative app stores. Apple is also enabling consumers to use an alternative contactless payment application as their default instead of the current Wallet app. Apple is enabling consumers to choose their default browser outside of Safari the first time they download the iOS update in March. Europe accounts for a small portion (~6%) of Apple’s total App Store sales, and the loss of revenue from a lower commission rate is likely to be largely made up for through the new fee on downloads on all types of apps in every app store (with exceptions highlighted above), as free apps constitute the vast majority of apps on the Apple App Store. While the changes impact the Services group in Europe only, we expect the changes will increase the focus on the anticipated DOJ antitrust lawsuit and the likelihood of Apple making similar changes outside of Europe to appease regulators."
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Shares of Apple closed at $194.50 yesterday.