Epic Games challenge to Apple (AAPL) is akin to a “high stakes game of poker.” So says Wedbush analyst Daniel Ives, when considering the challenge laid down by the maker of massively popular battle royale game Fortnite.
Last week, Apple booted the game from the App Store after Epic Games violated Apple’s rules by allowing users to make direct in-game payments in the Fortnite app. Apple’s rules state all purchases must be made through its proprietary payment system. Google kicked the game off its Google Play store for the same reason.
However, Epic Games were well prepared for the consequences and immediately filed lawsuits against the tech giants. The company reserved most of its ire for Apple and unleashed a potent video parody of Apple’s fabled “1984” ad, turning Apple in to the villain of the piece.
The brazen move by Epic will further shine the spotlight on Apple after CEO Tim Cook recently testified before Congress. The hearing – in Apple’s case – was set up to determine whether Apple’s App Store rules for third party developers amount to anti-competitive behavior resulting in a monopoly and market skewed in its advantage.
While other app makers such as Netflix and Spotify have taken the battle to Apple before, Ives believes “Epic’s moves are unprecedented.” The “major shot across the bow” could signal real danger to Apple’s App Store structure and could end Apple’s “unreasonable and unlawful practices” according to the complaint.
However, Ives believes Apple will ultimately win the case and defend “its golden jewel.” Nevertheless, the defiant move is not to be taken lightly.
“Apple needs to make sure the Epic challenge, which is timely in light of anti-trust swirls and growing opposition to Big Tech within the Beltway, does not create a ripple impact which developers globally are watching carefully,” Ives said, “The next steps will be in the courts while millions of Fortnite mobile users worry for now around the lack of updates and ability to download the app until this issue is settled. We will be watching this situation closely for any ripple impacts that could negatively impact the App Store fee structure going forward.”
All in all, Ives keeps his Outperform (i.e. Buy) rating as is, alongside a $515 price target. The implication for investors? Upside of 11.5% from current levels. (To watch Ives’ track record, click here)
Most of Ives’ colleagues agree with the analyst’s rating. Based on 22 Buys, 7 holds and 2 Sells, the analyst consensus rates Apple a Moderate Buy. However, in contrast to Ives’ expectations, the average price target clocks in at $433.54 and implies possible downside of 6% in the coming months. (See Apple stock-price forecast on TipRanks)
To find good ideas for tech stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
