Apple Fined 1.1 Billion Euro Over Anti-Competitive Practices

Apple (NASDAQ:AAPL) has reportedly been fined a record €1.1 billion by French anti-trust regulators — Autorité de la Concurrence — for engaging in anti-competitive practices.

Per The Guardian, the tech giant had agreements with two wholesalers, Tech Data and Ingram Micro, to align prices as well as limit wholesale competition for Apple products in France.

The regulators have alleged that Apple favored these two wholesalers and allocated more stock to them, while leaving others with insufficient inventory to meet customer demand. The two companies have also been ordered to pay €76 million and €63 million, respectively.

Apple stated that the decision will lead to disruptions for companies across all industries and is likely to appeal against it.

Apple Inc. Price and Consensus

Apple Inc. Price and Consensus

Apple Inc. price-consensus-chart | Apple Inc. Quote

Lawsuits Piling Up

Apple has faced several lawsuits in the past two years, with the recent being in March, this year when the company was ordered to pay a settlement of $500 million over intentionally inhibiting the performance of older iPhone models to preserve batteries.

The company also faced a lawsuit in June 2019, when two app developers sued Apple for alleged anticompetitive conduct and monopolization of the app store.

Recently, the U.S. supreme court rebuffed an appeal by Apple in a decade-long dispute where Nevada-based VirnetX — with less than $2 million in annual revenues — is fighting to collect royalties from Apple for secure communications technology used in the iPhone, iPad and Mac computers.

These lawsuits have revealed a chink in the tech-giant’s armor, with the company’s ability to monitor and handle legal threats under scrutiny. Additionally, it exposes the company to more lawsuits in the future. The implication that Apple is involved in unethical business practices could also dampen investors’ optimism in the company.

Further, the constant payment of settlements might put a dent on Apple’s reserves in spite of its huge reserve of cash and cash and marketable securities ($207.06 billion as of Dec 28, 2019).

Coronavirus Hurts Apple’s Prospects

The lawsuit comes at a time when Apple is dealing with the impact of the coronavirus pandemic. Notably, the rapidly-spreading virus has severely impacted Apple iPhone sales, especially in China. Per China Academy of Information and Communications Technology data, quoted by Reuters, iPhone sales in China have plunged 61% year over year in February 2020.

The COVID-19 outbreak has impacted Apple’s supply chain as well. Notably, the company’s iPhone assembling facilities were initially shut down outside Hubei (the epicenter of the coronavirus).

The company has also been slow to ramp up production back to normal levels, which is impacting global iPhone supply, per a BBC report. This is expected to hurt the top line in the upcoming quarters.

Zacks Rank & Other Stocks to Consider

Currently, Apple carries a Zacks Rank #2 (Buy).

Few top-ranked stocks in the broader technology sector are Applied Materials, Inc. (NASDAQ:AMAT) , Garmin Ltd. (NASDAQ:GRMN) and Microsoft Corporation (NASDAQ:MSFT) . All three stocks sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for Applied Materials, Garmin and Microsoft is currently pegged at 9.9%, 7.4% and 13.2%, respectively.

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