The U.S. Department of Justice antitrust lawsuit against Apple faces a long slog through the court system, but the consumer electronics giant stands a good chance of beating the rap, Wall Street analysts say. Apple stock rose on Friday.
The antitrust case likely will be "more of a headline risk than a financial risk" for Apple, Evercore ISI analyst Amit Daryanani said in a client note. "It will doubtless be a long process that will produce negative headlines, but we think Apple will prevail in the end."
"Existing laws make it very difficult to argue Apple operates a monopoly using market definitions or consumer harm standards," he said.
Daryanani estimated that the lawsuit could take two to three years to reach an initial conclusion and then another year for the appeals process.
"The first round of litigation will depend on the judge, but it will be tough for the DOJ to prevail all the way up the court system as the courts get more business friendly as you move up the chain with the current Supreme Court being the most favorable," he said.
Daryanani reiterated his outperform rating on Apple stock with a price target of 200.
Apple Stock Regains Lost Ground
On Thursday, after the Justice Department sued Apple, Apple shares fell 4.1% to close at 171.37.
However, on the stock market today, Apple stock rose 0.5% to close at 172.28.
The Justice Department accused Apple of violating antitrust laws with its restrictive iPhone and App Store policies. The lawsuit alleges that Apple's conduct makes it harder for Americans to switch smartphones, undermines innovation for apps, and imposes extraordinary costs on developers, businesses and consumers.
In a statement, Apple described the antitrust lawsuit as misguided.
"We believe this lawsuit is wrong on the facts and the law, and we will vigorously defend against it," the company said.
If the Justice Department succeeds, it would have negative consequences for the technology industry, Apple said.
"If successful, it would hinder our ability to create the kind of technology people expect from Apple — where hardware, software, and services intersect. It would also set a dangerous precedent, empowering government to take a heavy hand in designing people's technology," Apple said.
Case Will Be A Headache For Years
Wedbush Securities analyst Daniel Ives thinks the antitrust suit will have a minimal impact on Apple.
"Overall, we believe that the likelihood of the DOJ being successful here is low (less than 20%), but clearly this huge lawsuit from the Beltway will be a headache for Apple for many years to come," he said.
If the federal government succeeds in proving its case, the likely end result would be a fine and business changes that won't impact the company's bottom line that much, Ives said.
Ives maintained his outperform rating on Apple stock with a price target of 250.
Antitrust Case Called 'A Distraction'
JPMorgan analyst Samik Chatterjee shrugged off the impact of the antitrust case.
"We expect most investors to treat the possibility of a material change to the financial outlook for the company as modest; although, it will admittedly be a distraction and an overhang on the shares before the process concludes," he said in a client note.
Chatterjee rates Apple stock as overweight with a price target of 215.
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