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Investing.com -- Apple’s attempt to pause a lower court ruling that forces it to allow third-party payment links in its App Store was denied by the Ninth Circuit Court of Appeals, resulting in several Wall Street analysts providing their thoughts.
Analysts say the ruling, part of Apple’s ongoing legal battle with Epic Games, could meaningfully shift the economics of app distribution.
“This is a big deal for app developers,” JPMorgan (NYSE:JPM) wrote, noting that companies can now offer alternative payments at a 0% fee in the U.S., compared to the previous 27%.
JPMorgan expects margin uplift for developers like Match Group (NASDAQ:MTCH), Bumble (NASDAQ:BMBL), Roblox, and Duolingo (NASDAQ:DUOL), estimating increases of up to 5% in some cases. Spotify (NYSE:SPOT), Amazon (NASDAQ:AMZN) Kindle, and Epic Games may also benefit from increased user acquisition, having previously avoided in-app subscriptions due to Apple’s fees.
Apple’s Services revenue, however, could face moderate pressure. JPMorgan sees “a moderation in Services revenue growth of up to 200 bps,” translating to a 2-3% EPS headwind.
Evercore ISI analysts echoed this concern, estimating Apple (NASDAQ:AAPL) generates $7 billion from the U.S. App Store, or about 6% of EPS. “The risk to the Services business has been a key factor in Apple’s -19% YTD performance,” Evercore wrote, though it maintained an Outperform rating and $250 target on the stock.
Still, real-world user behavior hasn’t changed much, notes Morgan Stanley (NYSE:MS).
The bank’s May data is said to show U.S. App Store revenue grew 10% year-over-year, even after the injunction.
However, they said in a note to clients that their AlphaWise survey suggests 28% of U.S. iPhone users may bypass Apple’s in-app payment system, putting “2% of Apple EPS at risk.”
With the appeals process likely to stretch over years, the financial and strategic implications of this decision could linger, both for Apple and a broad range of app developers.
