Insights

Apple's antitrust lawsuit and the coming AAPL tremors

By Paul Reid

01 April 2024

apple lawsuit

Why is Apple being sued? Will Apple lose? And how will AAPL trade in the coming weeks?

In an unprecedented move that has sent shockwaves through both Silicon Valley and Wall Street, the Justice Department of the United States, led by Attorney General Merrick Garland, has filed an antitrust lawsuit against tech titan Apple. This bold action accuses the iPhone maker of monopolistic practices that purportedly harm consumers, developers, and rival companies alike.

The crux of the government's argument hinges on Apple's control over its ecosystem, deemed by some as anti-competitive, leading to calls for the tech giant to dismantle parts of its integrated services. This development is not just another headline—it's a beacon for traders, shining through the mist of today’s market, signaling a potential shift in price dynamics, investor sentiment, and the future landscape of tech innovation. 

We saw the destructive power of market sentiment last year with Google, Meta, and Tesla. Let’s see if Apple and AAPL can fare better in the coming days and weeks.

What traders might focus on

For traders, the immediate reaction might be one of caution. Apple's stock, a staple of stability and growth, now faces the specter of legal battles that could lead to regulatory actions requiring significant changes in how the company operates.

If Apple’s operations are indeed facing regulatory changes, the trader sentiment swarm will likely react quickly, and it’s unlikely that the market reaction will be bullish. Currently, AAPL is riding low, still following the downward trend that started in late January 2024. Negative reports from the media could double down on that bearish trend. 

Alternatively, if Apple is deemed innocent of monopolistic behavior, the positive news could be a catalyst for a rebound and the new formation of a bullish trend.

This lawsuit could be the beginning of a broader regulatory scrutiny of Big Tech, affecting market sentiment across the entire sector. Traders need to stay attuned to developments not just around Apple, but across the tech industry. Keep in mind that while legal cases can take months or even years and actual changes to Apple’s production won’t likely occur soon, but sentiment often reacts without relevance to a company’s solvency, so don’t be surprised if wild price actions begin as world media reports on the ongoing case.

Conclusion

A loss in an antitrust lawsuit could force Apple to alter its App Store. Users might gain access to alternative app stores, potentially leading to more competitive pricing and a drop in the Store's profitability. Developers could be allowed to use other payment systems, impacting Apple's revenue even more.

Loosened Apple restrictions might allow app developers to inform users about alternative payment options, potentially bypassing Apple's commission structure altogether. 

Alternatively, Apple could opt for a settlement with the DOJ, possibly involving less drastic changes to the App Store than a court-mandated overhaul.

What's clear is that the outcome of this case could redefine the boundaries of competition, innovation, and monopoly in the digital age. For now, AAPL will be hard to forecast and there will be plenty of mid-range price volatility, so if you are a day trader, now might be a great time to take a bite out of Apple. Otherwise, long-term traders should simply watch the space for something that will push sentiment over the edge.


This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.


Author:

Paul Reid
Paul Reid

Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.