Apple maintains Buy rating despite latest EU restrictions: BofA
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Apple (NASDAQ:AAPL) appears able to comply with the latest App Store link-out restrictions in the European Union as the Core Technology Fee should offset the lower App Store take rates required by the Digital Markets Act, according to Bank of America Global Research.
On August 8, Apple updated its App Store fee structure to comply with the European Commission. The changes center around how app developers utilizing Apple’s App Store in the EU link to the web to show users alternative payment methods.
“The major change AAPL has made is the StoreKit External Purchase Link Entitlement which allows developers to communicate and promote offers in the app regarding digital goods and services available for purchase in a distribution channel of the developer’s choice,” said BofA research analyst Wamsi Mohan, in a Monday investor note.
Following 1M installs, developers must pay a Core Technology Fee of €0.50, or $0.55.
“Apple estimates that less than 1% of developers would pay a CTF,” Mohan added. “However, the most popular app developers have downloads that cumulatively could run into the billions & could provide a substantial offset to the lowered app store take rates.”
In addition to maintaining its Buy rating on Apple, BofA also retains its price objective of $256 on the stock.
Apple inched up 1% by noon trading Monday. It has a Hold rating from Seeking Alpha analysts, but a Buy rating from Wall Street analysts. Seeking Alpha’s Quant system, which regularly beats the market, rates it a Hold.