The
US
Department
of
Justice
is
pursuing
Apple
in
an
anti-trust
lawsuit
that
challenges
the
company’s
ability
to
keep
its
competitors
outside
its
existing
product
and
customer
‘ecosystem’.
Among
other
things,
it
is
alleged
Apple’s
business
practices
give
it
an
unfair
advantage
and
help
to
“stifle”
broader
market
innovation.
Apple
vigorously
opposes
the
suit
and
says
it
has
done
nothing
wrong.
In
light
of
the
news,
Morningstar
analysts
have
re-assessed
the
case
for
Apple,
but
explain
below
that
very
little
in
their
thinking
has
changed
We
maintain
our
$160
(£127)
fair
value
estimate
for
Wide-Moat
technology
giant
Apple
(APPL),
and
keep
its
Medium
Uncertainty
Rating after
the
company
was
hit
with
an
anti-trust
suit
from
the
US
Department
of
Justice.
We
are
unsurprised
by
the
suit,
which
has
been
rumoured
for
months
and
follows
similar
actions
against
other
large
technology
firms
like
Alphabet
(GOOGL).
We
don”t
foresee
the
suit
resulting
in
a
significant
demolition
of
Apple’s
business
or
Moat.
In
our
base
case,
we
assume
the
suit
will
result
in
some
opening
of
Apple’s
walled
garden
ecosystem,
similar
to
what
we
expect
from
the
European
Union’s
Digital
Markets
Act.
We
still
believe
most
Apple
users
opt
into
the
firm’s
premium
closed
ecosystem,
and
we
don’t
predict
significant
attrition
for
the
firm’s
products
and
services
even
in
a
more
open
environment.
The
company’s
shares
dipped
more
than
3%
during
trading
yesterday,
a
stark
difference
from
other
technology
stocks’
positive
performance.
We
see
Apple
as
fairly
valued.
Key
Morningstar
Metrics
for
Apple
• Fair
Value
Estimate:
$160.00
• Morningstar
Rating:
3
stars
• Morningstar
Economic
Moat
Rating:
Wide
• Morningstar
Uncertainty
Rating:
Medium
The
suit
is
wide-ranging,
mentioning
the
App
Store,
Apple
Pay,
iMessage,
and
the
Apple
Watch.
It
appears
to
target
Apple’s
core
strategy
of
wrapping
customers
into
its
iPhone
ecosystem
with
auxiliary
products
and
services.
We
could
reasonably
foresee
Apple
opening
portions
of
this
ecosystem –
allowing
third-party
payment
services,
for
example –
and
it
has
already
planned
to
move
to
a
more
interoperable
messaging
standard.
We
don’t
model
a
massive
impact
from
the
suit.
We
believe
users
will
generally
continue
to
choose
Apple’s
easy-to-use
ecosystem,
even
against
more-widely-available
alternatives.
We
also
expect
the
suit
to
take
years
to
bear
out,
with
the
additional
possibility
of
a
new
US
presidential
administration
changing
the
priorities
of
litigators.
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