By Nigam Arora & Dr. Natasha Arora
Apple Loses To Epic
Please click here for a chart of Apple (AAPL) stock.
- The chart shows the fall in Apple stock on the news that AAPL loses to Epic in the court case.
- Epic makes video games. Epic did not want to continue paying AAPL 30% of revenues from sales in Apple Store.
- The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.
- The chart shows that the VUD indicator has been orange on the news indicating heavy supply of Apple stock.
- The supply of AAPL stock is coming from the momo crowd.
- As of this writing, there is no selling from smart money. Of note is that smart money previously was trimming its positions when the stock was higher. Smart money still holds large positions in Apple stock. Smart money is disciplined and they trim so that AAPL does not become a bigger part of their portfolios than is prudent.
- It is a long court ruling. Here are the key points:
- The following quote from the ruling is the most important one:
“The Court, having considered the evidence presented at the bench trial in this matter and consistent with its findings of fact and conclusions of law, HEREBY ORDERS as follows: Apple Inc. and its officers, agents, servants, employees, and any person in active concert or participation with them (“Apple”), are hereby permanently restrained and enjoined from prohibiting developers from (i) including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchasing and (ii) communicating with customers through points of contact obtained voluntarily from customers through account registration within the app.”
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- Apple won nine out of 10 counts.
- The most important win for Apple is that the court did not declare that Apple is a monopoly.
- Apple derives about 30% of its service revenue from the App Store.
- Revenue from video games is a heavy contributor.
- In our analysis, consumers are lazy and they are not likely to migrate en masse to vendor sites even for cheaper prices.
- If our analysis proves to be correct, the impact on Apple earnings will be only a few cents.
- AAPL may decide to appeal and tie the matter up in courts for years.
- The big negative for AAPL is that the decision may embolden the regulators to mount a strong antitrust case against AAPL.
Zones
There is no change in the prior zones due to this decision against Apple.
For those following the Good Way, the Buy Now rating remains 🔒 (To see the locked content, please take a 30 day free trial) 🔒’
For those following the Best Way, the buy zone is 🔒.
The very long term target zone for Apple remains 🔒.
The recommended position size remains 🔒 of full core position size for those starting a position now.
Long Term Subscribers
Long term subscribers to The Arora Report are holding AAPL from as low as $4.68. Apple is trading above $150 as of this writing. Due to the massive gains, Apple has become a very large position in the portfolio of long-term subscribers.
What To Do Now
Those in Apple stock may consider reviewing the position size relative to the rest of the portfolio. This review should dictate either holding the stock or trimming.
Those not in the stock may consider buying the Apple stock by scaling in if it dips in the buy zone.
To learn more about scaling, please see Trade Management Guidelines.
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This post was just published on ZYX Buy Change Alert.
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Nigam Arora
Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.
Dr. Natasha Arora
Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.
