Apple (AAPL) – Get Apple Inc. (AAPL) Report investor expectations “remain muted” ahead of the computer giant’s iPhone 13 unveiling, setting up a busy fall with product launches, a Morgan Stanley analyst said.
Analyst Katy Huberty discussed investor expectations leading up to Apple’s annual event, dubbed California Streaming, which is set for Tuesday. “Investor expectations remain muted, which creates a compelling setup into the fall should early iPhone 13 data points outperform expectations,” the analyst said in a research note.
Huberty said that based on conversations with her Apple supply chain research colleagues, “we expect the fall of 2021 to be another busy period of product launches, with the iPhone 13 family, the Apple Watch 7, AirPods, 3, new iPads, and new MacBook Pros with M1 all expected to be released before year-end.”
Investors expect the iPhone 13 to be a more “evolutionary” product cycle with fewer significant technology upgrades compared with iPhone 12, she said. The analyst said the iPhone launch event has not been a major stock catalyst. Over the past seven years, Apple shares have risen just 1% on average in the week following the event.
“Should early iPhone 13 demand data exceed buy-side expectations,” Huberty said, “we’d expect Apple shares to rerate higher and likely trade between our $168 base and $245 bull-case valuations, driven by both positive estimate revisions and multiple expansion.”
In terms of positioning ahead of the event, Huberty said “we still believe the majority of institutional investors are positioned as neutral to negative, despite the fact that Apple shares have rallied over 20% in the past 3 months following a number of App Store headlines that have resolved a handful of existing lawsuits/investigations.”
Piper Sandler analyst Harsh Kumar raised the firm’s price target on Apple to $175 from $165 and reiterated an overweight rating on the shares. Baird analysts boosted their price target for Apple to $170 from $160 a share, saying they “continue to view [the] shares as attractive for long-term-oriented investors.”
Apple and Alphabet’s Google (GOOGL) – Get Alphabet Inc. Class A Report will be required under a new South Korean law to open their application stores to alternative payment systems. The bill was passed by South Korea’s National Assembly, The Wall Street Journal reported, and it is the first in the world to dent the companies’ dominance over how apps on their platforms sell their digital goods.
The legislation amends South Korea’s Telecommunications Business Act to prevent large app-market operators from requiring the use of their in-app purchasing systems. It also bans operators from unreasonably delaying the approval of apps or deleting them from the marketplace. Companies that fail to comply could be fined up to 3% of their South Korean revenue by the Korea Communications Commission.
The bill in Korea has been nicknamed the “Google power-abuse-prevention law” by some lawmakers and media. Google’s Play Store accounted for 75% of mobile app downloads globally in the second quarter. Apple accounted for 65% of app-store consumer spending on in-app purchases and subscriptions during the same quarter, the Journal reported, citing App Annie, a mobile-app analytics firm.
Apple and Google are facing lawsuits and investigations in several countries.
Here is a breakdown list of the technology and FAANG stocks to watch right now based on their performance over the past week:
Judge Ruled That Apple Violated California Competiton Laws in Epic Games Dispute
Apple (AAPL) – Get Apple Inc. (AAPL) Report shares slumped lower after a judge ruled that the tech giant had violated California competition laws in its dispute with Fortnite maker Epic Games. U.S. District Court Judge Yvonne Gonzalez-Rogers said restrictions Apple has put in place that prevent app developers from steering customers to payment options beyond ApplePay are anticompetitive and issued an injunction restricting the practice. Judge Gonzalez-Rogers also said that Apple can’t prevent app developers from communicating directly with customers through the contact information they provided at sign-up.
That aspect of the judgment formed part of a broader ruling in the Epic Games case in which Apple was awarded damages equal to 30% of the revenue that Epic collected from users in the Fortnite app since 2020. Apple CEO Tim Cook said Apple does a far better job reviewing apps than third-party companies do.
Salesforce Rival Freshworks Filed For an Initial Public Offering
The Salesforce (CRM) – Get salesforce.com, inc. Report rival Freshworks filed for an initial public offering that revealed its revenue for the first six months ended June 30 soared by almost 53% compared to the same period a year earlier. Freshworks has not yet determined the number of shares to be offered or the price range for the proposed offering, according to a statement.
The San Mateo, Calif., company intends to list its Class A common stock on Nasdaq under the symbol FRSH, which is backed by investors, including Sequoia Capital, Tiger Global Management, Accel, and CapitalG, which have pumped $327 million in funding into the company, according to Freshworks’ website.
Zoom Video Communications Disappoints Investors
Zoom Video Communications (ZM) – Get Zoom Video Communications (ZM) Report said it expects third-quarter revenue of between $1.015 billion and $1.020 billion, disappointing investors even as it beat second-quarter estimates from Wall Street.
The video conferencing company saw massive growth in the last year as the coronavirus pandemic spurred demand for its services from office employees and students who were forced to work and learn from home because of economic shutdowns and stay-at-home orders. But the pace of that quarter-to-quarter growth now appears to be flattening. Analysts cut their price targets after Zoom warned that its current revenue would likely slow.
Microsoft Announced Upgrades to Windows 11
Microsoft (MSFT) – Get Microsoft Corporation (MSFT) Report announced that it will start offering free upgrades to Windows 11 on eligible PCs on Oct. 5. Microsoft will use on-device data and other factors to determine which devices will get the offer to upgrade first, the company said in a blog post. The upgrade will be available on eligible Windows 10 PCs and PCs that come pre-loaded with Windows 11. The company expects all eligible devices to be offered the free upgrade by mid-2022. The new operating system will be “the best Windows ever for gaming.” Windows 11 comes six years after Microsoft released Windows 10, marking the longest stretch the company has had between new Windows launches, according to CNBC.
Microsoft’s stock hit an all-time high above $305.30 earlier this month as the stock has risen nearly 40% year to date while it chases Apple to be the world’s most valuable tech company. On September 9, the company says that it has indefinitely postponed the return to its offices in the U.S.
Facebook Began Selling Ray-Ban Stories Smart Glasses
Social-media titan Facebook (FB) – Get Facebook, Inc. Class A Report began selling Ray-Ban Stories smart glasses, as it seeks to succeed where Google Glass (GOOGL) – Get Alphabet Inc. Class A Report failed. With the glasses, wearers can make phone calls, record videos, take pictures and listen to music. They start at $299 and are available in 20 styles at Ray-Ban stores and Ray-Ban.com in the U.S., U.K., Italy, Australia, Ireland and Canada. Starting Monday, the glasses can be bought at Amazon, Best Buy, Sunglass Hut and LensCrafters, according to CNBC.
Facebook shares eased Thursday after Ireland’s regulators announced they’re fining the social media titan’s WhatsApp unit 225 million euros ($267 million). The fine stemmed from what the Irish authorities said was a violation of European Union privacy laws.
Amazon in Talks to Acquire Rights for NFL’s Sunday Ticket Package
Amazon (AMZN) – Get Amazon.com, Inc. Report is reportedly in talks to acquire the rights for the National Football League’s “Sunday Ticket” package and is believed to be the front-runner by others involved in the discussions. Amazon has a serious interest in the multiyear package of out-of-market games, CNBC reported citing people familiar with the matter. The NFL is expected to ask for $2 billion to $2.5 billion per year for the package and wants to wrap up discussions before the season ends in February.
The company also announced this week that it will offer to pay the full college tuition for more than 750,000 U.S. hourly employees as job openings in the country hit a new record high. Amazon said it would expand the education and skills training benefits it offers to its U.S. employees with a total investment of $1.2 billion by 2025. Starting in January, Amazon said it will cover the cost of college tuition, fees and textbooks for hourly employees in its operations network after 90 days of employment.
Google Delays Plans for Workers’ Return To Offices
Alphabet’s Google is delaying, until early January, plans to have workers return to the office, amid a surge in infections from the Delta variant of the Covid-19 virus. Chief Executive Sundar Pichai set a new target date of Jan. 10, which he says will offer workers more flexibility. Beyond that date, the company will allow different countries and locations to decide when to end the voluntary work-from-home conditions with at least 30 days’ notice.
Jim Cramer said Google-parent Alphabet is one of the cheapest of the FAANG stocks and he said he sees numerous tailwinds for the stock ahead. “I can’t see how you can sell it here,” said Cramer. “There could be a better entry point, for certain, on a wicked down day if rates spike, as I said. There will be a better time. But I like the parent of Google more than ever, now that…YouTube’s being monetized. Waymo’s close to being monetized. Cloud is on fire,” he added.
Netflix is a Key Driver of Ongoing Disruption of Linear TV
Netflix (NFLX) – Get Netflix, Inc. (NFLX) Report is “a key beneficiary and driver of the ongoing disruption of linear TV,” according to a JP Morgan analyst Dough Anmuth, who raised his price target for the streaming service giant to $705 from $625 and affirmed an overweight rating. “With the company’s content performing well globally and driving a virtuous circle of strong subscriber growth, more revenue, and growing profit,” he said.
The analyst said that Netflix’s originals, such as “Clickbait,” “He’s All That,” “Money Heist,” “Outer Banks” and “Sweet Girl” were among the most popular U.S. titles from Aug. 18 to Sept. 6. Anmuth said he expected Netflix to continue to benefit from the global proliferation of Internet-connected devices and increasing consumer preference for on-demand video consumption over the Internet.
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