MSFT - Potential Microsoft app store would be 'immaterial risk' to Apple: Morgan Stanley

2023-03-21 08:34:01 ET

If Microsoft ( NASDAQ: MSFT ) were to launch an app store for smart devices as soon as 2024, assuming its deal with Activision Blizzard ( ATVI ) closes, it would be an "immaterial risk" to Apple ( NASDAQ: AAPL ), Morgan Stanley said on Tuesday.

Analyst Erik Woodring, who has an overweight rating and $180 per-share price target on Apple ( AAPL ), noted the potential app store would impact just 3% of Apple's App Store revenues and less than 1% of its total revenues and earnings.

"If we took a 'worst case' view of the world and said the potential Microsoft app store could take all EU gaming revenue from the Apple App Store – given the focus of the [Digital Markets Act] is just in Europe, for now – that would equate to 8% of App Store revenue, 2% of Apple Services revenue, and a [roughly] 1% hit to Apple company-level revenue and EPS," Woodring wrote in an investor note.

On Monday, Microsoft ( MSFT ) gaming chief Phil Spencer said in an interview with the Financial Times the company was looking into whether a Microsoft app store would be feasible.

Citing Morgan Stanley's survey work, Woodring also noted less than 30% of Apple ( AAPL ) users in the U.S. and China - the company's two biggest markets - would be willing to buy apps directly from the developer and that the apps would have to be roughly 35% cheaper for them to do so.

Apple ( AAPL ) and Microsoft ( MSFT ) shares were both little changed in premarket trading on Tuesday.

Last week, investment firm KeyBanc Capital Markets said its proprietary data showed February spending on Apple ( AAPL ) products and services was above the three year average .

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