Apple’s stock has fallen by 7.2% in 2024, while the Nasdaq rose 11.2%, due to a Department of Justice lawsuit alleging antitrust violations. The company’s revenue growth has been stagnant over the past six quarters, reflecting the maturity of its hardware products. Apple’s stock growth has been driven by locking in customers to the iPhone and stock buybacks from investors like Warren Buffett. With revenues stagnating and Buffett selling some of his Apple stake, the question arises about what could catalyze the company’s revenue acceleration and stock price.
Apple could continue buying back stock with its $73 billion cash reserve, as its only source of growth last year was its services business, which grew by 9%. However, the DOJ’s antitrust lawsuit poses a threat to this growth, which may impact the company’s top-line growth. Apple has defended its practices, stating that their strategies make iPhones more secure than other smartphones. The company has vowed to vigorously defend against the lawsuit and believes it sets a dangerous precedent for government intervention in technology design.
The DOJ’s lawsuit accuses Apple of using its monopoly power in the smartphone market to lock out rivals from providing complementary products and services to iPhone customers. The government alleges that Apple limits access to certain features for finance companies and Bluetooth trackers, while making it easier for users to connect to their own products and creating obstacles for rival companies. Apple argues that these practices are necessary for the security and integrity of its products, and any interference could hinder its ability to innovate.
The lawsuit claims that Apple’s conduct has harmed consumers and developers by limiting choices, increasing prices, lowering quality, and stifling competition. However, the complaint lacks compelling evidence to quantify how much Apple may be overcharging consumers. The presence of social stigma among users, such as the “green bubble effect” when non-iPhone users receive messages, adds to the narrative of consumer lock-in to the Apple ecosystem.
While Apple has successfully defended against antitrust challenges in the past, the current lawsuit raises concerns about the company’s market dominance and practices. The DOJ alleges that Apple’s market share in the smartphone market exceeds 70% by revenue, but independent data providers suggest otherwise. Furthermore, legal experts question whether laws can force companies to design products that are more compatible with competitors. Apple plans to file a motion to dismiss the case within 60 days, citing competition laws that permit companies to adopt policies that enhance customer experience, even if it disrupts rivals.
Investors, including Warren Buffett, are closely watching the outcome of the lawsuit and its potential impact on Apple’s stock price. Berkshire Hathaway has trimmed its Apple stake, raising questions about the company’s future growth prospects. To increase shareholder value, Apple must revive its growth trajectory, as revenues are expected to decline for the fifth quarter out of the last six. Investor concerns include weak sales in China, lagging position in artificial intelligence, limited revenue prospects in new products, and regulatory challenges like the DOJ’s antitrust lawsuit. Despite its strong brand, Apple faces hurdles in driving growth and may continue to face pressure on its stock performance.
