Apple faces regulatory pressure and other unknowns
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An analyst’s note suggests regulation from the EU A $2 billion fine could put pressure on Apple's earnings per share, but the move to artificial intelligence will help keep earnings multiples even at around 25x.
There is a lot of uncertainty surrounding Apple due to many competing forces. All eyes are on Apple's artificial intelligence efforts following the cancellation of Project Titan, and the EU continues to challenge Apple's business practices.
According to a JP Morgan note reviewed by AppleInsider, the current 27 times earnings per share will likely fall to 25 times due to several factors surrounding the company. It highlights the potential risk associated with regulatory scrutiny, as well as the loss of potential premium multiples due to entry into the EV segment.
There is not much information other than a summary of why such pressure exists. Earlier on Monday, Apple was fined nearly $2 billion over what it considers antitrust practices in the EU.
Apple also faces further regulatory problems if the EU Commission is not happy with the updates to the Digital Markets Act. At least 34 companies, including Spotify, have expressed opposition to Apple's proposed updates to iOS 17.4.
The Apple Car project is dead, eliminating the reason investors viewed the stock as a premium. The move to artificial intelligence is helping to curb this frustration, but Apple is still considered an industry laggard.
All this suggests that JP Morgan sees a more attractive opportunity to achieve a 25 times price-to-earnings ratio. The stock remains rated Outperform with a $215 price target.
