Apple's Partial Antitrust Court Win Fails to Alleviate Core Overvaluation and Regulatory Risks

What happened

Apple secured a partial reversal in the Epic Games antitrust lawsuit, with a U.S. appeals court overturning some required App Store changes to promote competition. This outcome touches Apple's lucrative Services segment, which generates 75% gross margins and is central to its profitability amid mature hardware sales. However, the court upheld a sweeping injunction, ensuring ongoing regulatory pressure that could force alterations to App Store policies and fees. The DeepValue report highlights such antitrust and DMA risks as key threats to Services margins, which underpin Apple's premium valuation despite trading 165% above a conservative DCF estimate. Thus, while the decision offers temporary relief, it does not resolve the persistent legal challenges that endanger Apple's high-moat ecosystem and justify a SELL recommendation due to overvaluation.

Implication

Investors should note that the partial court victory may slow near-term fee cuts in Apple's Services, potentially supporting revenue but not eliminating regulatory uncertainty. The upheld injunction maintains legal overhang that could dampen developer innovation and consumer trust in the App Store, impacting ecosystem strength. With Apple trading at a P/E of 37x and 165% above DCF value, even minor margin erosion in Services—a key profit driver—could validate the SELL stance from the DeepValue report. Persistent antitrust risks, combined with China competition and tariff issues, underscore that Apple's current price lacks a margin of safety despite strong cash flows. Therefore, while the stock might experience short-term optimism, value-focused investors should remain underweight or trim positions, as the core investment thesis of overvaluation and elevated risks remains intact.

Thesis delta

The court decision provides limited positive news but does not shift the fundamental investment thesis. Apple's overvaluation persists with P/E at 37x and DCF indicating 165% overprice, while regulatory, China, and tariff risks continue to threaten future cash flows. Thus, the POTENTIAL SELL recommendation stands unchanged, emphasizing that investors should await clearer signs of sustainable growth or margin resilience before reconsidering the stance.