Mitch's Mailbox

April 17th, 2024

Apple’s Antitrust Lawsuit And The Regulation Of Tech

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Joey K. from Hershey, PA asks: Hello Mitch, do you think the recent antitrust lawsuit against Apple is a big deal for the Tech industry at large? What are your views on the Technology sector at the moment?

Mitch’s Response:

Thanks for writing, Joey. The first point I need to make is that I don’t write about individual stocks in this column or others, so any mention of Apple or other companies should not be construed as a recommendation.

For readers who aren’t aware, late last month the U.S. Justice Department sued Apple, accusing the company of monopolizing smartphone markets. Apple has been the subject of anti-competitive lawsuits before and has generally prevailed. A few years ago, Epic Games lost a lawsuit against Apple alleging the company of a monopoly over mobile games, which arguably means the Justice Department has a tall mountain to climb.1

In the realm of tech regulation, I would also add that overseas, the European Union began enforcement of the Digital Markets Act on major tech companies, which is likely to raise costs in the form of adjusted business practices, strategies, and compliance. So, I think it’s fair to say that regulatory headwinds are growing globally.

Turn Market Volatility into an Opportunity – Here’s How

Considering these regulatory challenges, it’s crucial to remember that market turbulence is a normal part of investing. Dealing with sudden ups and downs can be challenging, but there are positive aspects to volatility.

Even when your uncertainty levels are high, it’s worth noting that managing volatility can lead to valuable learning experiences and opportunities for growth. So today, I’m offering our free guide, “Using Market Volatility to Your Advantage,” which shares insights from our decades of experience on how a volatile market can help investors refine strategies and potentially boost returns over time.

It covers:

• How market volatility can “shake up” complacent investors
• Potential bargains that may be uncovered through turbulence
• Why volatility may help prevent overheating and market “bubbles”
• What history shows us about opportunities for steady investors in turbulent markets
• Plus, more ways you may be able to benefit from a volatile market

Download Our Guide, “Using Market Volatility to Your Advantage”2

But in my view—and to answer your question—these legal fights and forced adjustments to business practices are likely to stretch out over many years, and may result in some level of drag on earnings. But the bigger risk is that a major company is forced to be broken up, or that regulations target major revenue sources. In my view, neither of these latter outcomes seems likely, even as the appetite for regulation is high and rising.

Technology continues to be a dominant performer from a sector standpoint in the U.S., which has many wondering if ‘euphoria’ is starting to come into play. Indeed, investors can easily get over-excited about innovations in technology, especially ones with the promise to reshape the entire economy. Readers remember the 2000 tech bubble.

What’s different about today, however, is that the game-changing innovations—namely generative artificial intelligence and machine learning that many are excited about—are already generating massive profits for companies producing the chips, servers, and infrastructure needed to power this nascent technology. Major AI suppliers and beneficiaries alike are seeing incredibly strong free cash flow margins, outpacing every other sector’s net margins.

Another key is that unlike 1999 (and 2020), unprofitable tech companies are not seeing the same kind of valuation surge that accompanied more speculative technology bull markets of the past. While many of the highest-quality tech company valuations are back up near the 2020/2021 highs, investors are favoring companies with strong and rising earnings—signaling a ‘healthier’ rally in the sector that I think can be sustained as long as profits are being generated at this pace.

Building on this theme of a ‘healthier’ rally, it’s worth diving deeper into how you can navigate and potentially benefit from market volatility. To provide insight into some of these positives, I’m offering all readers our guide “Using Market Volatility to Your Advantage3“. This guide shares insights from our decades of experience and can help you understand how a volatile market can actually refine your strategies and potentially lead to solid returns over time.

It covers:

• How market volatility can “shake up” complacent investors
• Potential bargains that may be uncovered through turbulence
• Why volatility may help prevent overheating and market “bubbles”
• What history shows us about opportunities for steady investors in turbulent markets
• Plus, more ways you may be able to benefit from a volatile market

If you have $500,000 or more to invest, download this free guide today by clicking on the link below.

Disclosure

1 Wall Street Journal. March 22, 2024. https://www.wsj.com/us-news/law/monopoly-case-pits-justice-department-against-apples-antitrust-winning-streak-2841bb2a?mod=djem10point

2 ZIM may amend or rescind the free guide offer, Using Market Volatility to Your Advantage, for any reason and at ZIM’s discretion

3 ZIM may amend or rescind the free guide offer, Using Market Volatility to Your Advantage, for any reason and at ZIM’s discretion

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

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