Please ensure Javascript is enabled for purposes of website accessibility

When Epic and Apple Square Off in Court This Week, Apple Will Win, Says Analyst

By Rich Duprey - May 3, 2021 at 10:31AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

But it could be a major revenue hit if it loses.

Epic Gaming is getting its day in court. The Fortnite developer's antitrust lawsuit against Apple (AAPL 0.00%) over its App Store fees and the tech giant's decision to boot the game developer from the platform is scheduled to begin this week.

Although Epic has a lot of support from other tech and gaming developers, who have chafed at the stiff slice of revenue Apple takes from every sale, at least one analyst doesn't think it will be much of a contest and sees Apple coming out on top.

Scene from Fortnite online game

A scene from Fortnite. Image source: Epic Gaming.

The legal challenge started when Epic devised a way for Fortnite players to bypass the App Store and make in-game payments directly to the game maker. That violated Apple's terms of service, since it takes upward of 30% of all revenue made from such purchases.

The response was swift and punitive: Epic was booted from the App store, which wiped out about 60% of the revenue it generated from players who use iOS to play Fortnite. Apple also removed its Unreal Engine, the game graphics engine, though a judge ruled Apple had to restore it since it was not part of the dispute. However, the judge also did not appear sympathetic to Epic's plight as he told the game developer its "predicament appears of its own making."

Wedbush analyst Daniel Ives says Apple will likely prevail on booting out Epic. He noted the tech giant has successfully defended the App Store in the past and will undoubtedly do so again. But if Epic does win, Ives said, it would be a "major gut punch" for Apple, which generated over $32.6 billion in services revenue last year, primarily from the platform.

Ives rates Apple as an outperform with a $185 share price target, some 39% above where the tech stock closed last Friday.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$141.66 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.