Apple Inc. (NASDAQ:AAPL) shares rose 3.9% in premarket trading Wednesday following a ruling by U.S. District Judge Amit Mehta in the Google antitrust case, which analysts described as highly favorable for the iPhone maker.
In a note, Morgan Stanley called the decision “a near best-case scenario” for Apple, adding that the company “can still collect TAC payments from GOOGL (with conditions) and can renegotiate the default search socket annually.”
Analysts noted that the ruling is “better than our prior ‘Scenario 4’ framework & likely resulting in an immaterial, to potentially positive, financial impact.”
The court barred Google from holding exclusive contracts for Search, Chrome, Assistant, and Gemini, while allowing it to continue making payments to distribution partners.
“In layman’s term, this means that Google can no longer be Apple’s exclusive and default search partner for multiple years, but that Apple can continue to collect traffic acquisition payments from Google (and others) to distribute search,” Morgan Stanley said. These payments represent a “$25B+ annual revenue business for Apple, with 95%+ margins.”
The bank concluded: “The bottom line — this is a near best-case scenario for Apple and should be a clearing event for the stock.”
Morgan Stanley added that the financial effect is likely negligible, and perhaps even positive, as Apple can now renegotiate rates annually and has the option to introduce a search choice screen if it chooses. The firm also noted: “Apple is ‘actively looking at’ adding a GenAI product as a search option in its Safari web browser and expects to do so in the coming year.”
Bank of America shared a similar view, describing the ruling as “a win for Apple” and raising its price target to $260, citing increased confidence in Services growth.
“In our opinion, the substance of this remedy already exists today where Apple has Google as the default search engine, but also allows users to change that default to some other search engine in settings (choice screen not mandated),” BofA wrote.
This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.