Apple: How A Mandated Third-Party App Store Could Impact Growth

J Studios/DigitalVision via Getty Images We have previously covered Apple (NASDAQ:AAPL) here as a post-FQ4'22-earnings article in November 2022. It was previously discussed in

depth that the Foxconn riot might be an indication of temporary top-line headwinds, which may subside due to the intensified diversification to Vietnam, Thailand, and India. The

company's robust financial performance has also helped to temper some of the market's pessimism, triggering minimal corrections to date. For this article, we will be focusing on

the impact of the Digital Markets Act in the EU, which may force AAPL to allow third-party app stores and alternative payment methods moving forward. The same has been observed in

its Self-Service Repair Program, which was attributed to the FTC's enforcement against tech companies that previously required electronic repairs performed only by authorized

vendors. After careful deliberation, the new regulation would likely have a moderate to minimal impact on the company's top and bottom lines ahead. We'll discuss this further. The

Fine Balance Of Regulatory Compliance While Maintaining Consumer Behavior AAPL is reportedly considering third-party app stores to comply with the Digital Markets Act in the EU

coming into force from March 2024 onwards, coinciding with the release of iOS 17 by early 2023. Morgan Stanley has suggested that this decision may potentially decrease the

smartphone giant's annual revenue by -1% and EPS by -2.5%. These estimates were optimistic indeed, since we have previously projected a revenue impact of up to -8.3%, based on an

aggressive -30% haircut on the company's reduced commission and alternative payment methods. Naturally, these are merely speculation, since it is unknown whether AAPL will allow

alternative payment methods on third-party app stores as well. Furthermore, these numbers are contingent on app developers opting to receive payments outside the company's

platforms, despite the attractive -30% discount in commission rates. The App Store continues to maintain the largest market share in the global mobile application at $64.9B, or the

equivalent of 67.1% in the first three quarters of 2022, primarily attributed to the higher monetization rate through in-app purchases and premium apps. Furthermore, Bloomberg has

reported that AAPL may charge a fee to verify these third-party apps, potentially circumventing the loss in revenue. However, assuming that the US similarly imposes a similar move,

we may see a significant impact on its top-line growth indeed, since the country is expected to record up to $42.31B of in-app purchases in 2022, growing by 13% YoY. In the