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Apple Roundup: Irish Tax, HomePod, Bernstein, Samsung Fight

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Apple (AAPL - Free Report) shares moved up and down over the past week, as investors continued to blow hot and cold about its prospects. But the Zacks methodology places it at a solid Hold right now, as indicated by the Zacks Rank #3. Buying opportunities in technology instead include Salesforce (CRM - Free Report) , Upland Software (UPLD - Free Report) and NVIDIA Corp (NVDA - Free Report) . Or, you can simply take a look at the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

As far as Apple is concerned, here are the top stories that drove the shares-

Starts Paying Irish Tax

Ireland’s Finance Minister Paschal Donohoe has said that Apple has deposited 1.5 billion euros (1.3 billion pounds) into the escrow account named for the purpose in lieu of taxes that both Apple and the Irish government are appealing. In August 2016, the European Commission adjudged that the tax concessions the country granted Apple were illegal and that Apple therefore owed back taxes to the tune of 13 billion euros.

Smaller countries usually offer these concessions to attract investment but the EC is of the opinion that the scale of the concessions provided weren’t justified by law and resulted in anticompetitive behavior that adversely impacted other European countries. In October, the EC threatened to take the two to the European Court of Justice for delayed recovery of dues.

HomePod Captures 6% Market Share

Strategy Analytics says that HomePod, Apple’s Siri-powered smart speaker, garnered a mere 6% share of the market in the first quarter, trailing Amazon’s (AMZN - Free Report) Alexa-powered Echo, which used its first mover advantage to pick up a 47% share and Alphabet’s (GOOGL - Free Report) Assistant-powered Google Home, which is rapidly gaining ground with a 27% share.

HomePod didn’t launch until February, so it was a partial quarter for the music-focused device. Apple has poached a Google engineer and is doubling down on Siri, which should generate desired results for the company.

At the same time, none of these companies sell their smart speakers in China, which is growing rapidly, so domestic players like Xiaomi and Alibaba (BABA - Free Report) are taking share of the global market, leading both Alphabet and Amazon to concede market share.

Bernstein on Apple Services Business

Apple’s services business grew 18% in the last-reported quarter, lifting investor sentiments with respect to an otherwise non-exceptional quarter. However, Bernstein analyst Toni Sacconaghi feels that the strength in Apple’s Services business, which has a $12 billion annual revenue runrate, was mainly because of a renegotiated contract with Google to keep it as the default search engine. He says that second half growth will decelerate both on account of “tougher comps and as the licensing business laps its contract renegotiation with Google.”

“While we still doubt that Services can sustainably grow at 20%+ without new services offerings, we now see Apple as likely to hit its bogey of doubling Services to $49B by the end of FY20," he added.

Still Fighting Samsung for $1 Billion

The two companies have been sparring over the amount of damages that Samsung needs to pay Apple for the infringement of three patents, including one about rounded corners. The patent office actually creates these problems by granting ridiculous patents (or maybe rounded corners were such a big breakthrough seven years ago that it was impossible for others to think it up on their own, so consumers should pay a premium for the feature).

Apple thinks it needs to be paid on the value of the entire phone while Samsung says the damages should be determined on the component value alone. So while Apple wants a billion dollars, Samsung is thinking maybe $28 million.

 

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