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Apple Stares Down Massive $539M EU Antitrust Fine Amid App Store Controversy

+ 2 Stock ideas: ZoomInfo & Carasent

Hello, hunters for market opportunities!

Today, we feature stories of Apple’s antitrust fine, ChatGPT’s slowing growth, tech stock shifts, and more. We have also found two bullish stock ideas on ZoomInfo and Carasent.

Let’s dig in!


Apple Stares Down Massive $539M EU Antitrust Fine Amid App Store Controversy

Apple Inc. is bracing for an approximately $539 million (€500 million) antitrust fine from the European Union, following accusations of impeding competition in the app market. The inquiry, the EU’s first antitrust action against the tech behemoth, comes as a response to a 2019 complaint lodged by Spotify Technologies SA.

Spotify claimed that Apple’s conduct of the App Store rules, especially the anti-steering regulations, promoted an unfair competitive environment. EU regulators responded to these accusations by suggesting these rules have led to inflated customer prices.

In 2022, Apple implemented changes to allow music services like Spotify to redirect app users to their respective websites for subscription sign-ups. This meant allowing users to bypass Apple's infamous revenue cut of up to 30%, offering consumers additional pricing and subscription options. However, Spotify rebuffed these changes, dubbing them as merely “for show.”

The impending fine, anticipated to be declared in the coming month, forms part of the EU’s more significant regulatory initiative to suppress potential competition violations by powerful tech entities. With the implementation of the Digital Markets Act (DMA) due for full force in March 2024, the new regulations will legally prevent dominant firms from prioritizing their services over competitors' offerings.

Officials and industry insiders eagerly await the EU's definitive verdict. Not only because it will set a precedent for Apple, but also due to potential ramifications for the broader tech sector. The outcome could alter the future competitive landscape and operations of digital markets. Therefore, this decision serves as a critical inflection point to maintain scrutiny over the fairness, competitiveness, and consumer advantages in the tech industry.

📉 Tech Stocks Shift - Hedge funds have recently banked on profits from "Magnificent Seven" technology stocks during the fourth quarter, marking a shift in investment strategies. Prominent firms like Appaloosa Management and D1 Capital have reduced their stakes in leading semiconductor companies such as Nvidia, AMD, Intel, and Qualcomm. This trend extended to other tech giants, including Alphabet, Amazon, and Microsoft, indicating a broader move towards consolidating profits from the year's high-performing stocks. Meanwhile, the focus on future investments seems to pivot towards efficiency, with Meta Platforms being highlighted as a key interest area.

📈 Strategic Moves in the Nordics - Storytel aims for greater profitability, reporting a 16% revenue boost in Q4 2023 and announcing a 13% cut in its workforce to improve efficiency. Meanwhile, Betsson expands its global footprint by acquiring Holland Gaming for €27.5m, underlining its strategy for profitable growth through geographical diversification, pending regulatory approval.

🎮 Nintendo's Setback - In a surprising turn, Nintendo's stock tumbled by 5.84% following the announcement that the highly anticipated Switch 2 console's launch would be delayed until 2025. This delay has shocked investors, especially after a 53% surge in the company's stock price, fueled by expectations of the new console.

🤖 Growth Challenge - OpenAI's ChatGPT has seen a drop in web traffic by 11% since May 2023, indicating stagnation in user engagement. Despite this slowdown, OpenAI is not standing still; it's actively developing ChatGPT and exploring new technologies like the Sora video model and AI agents to spark new growth avenues. Meanwhile, SoftBank's CEO is ambitiously raising $100 billion for an AI chip venture to rival Nvidia, with plans to partner with Arm and attract significant investment from Middle Eastern investors, showcasing the competitive and evolving landscape of AI technology.


ZoomInfo (ZI): AI-powered Copilot and Unique B2B Database Drive Strong Buy Rating

ZoomInfo (ZI), a leading B2B data provider, is a promising stock set for significant growth owing to its recent development, the "AI-powered Copilot." The company's impressive business model, revolving around its unmatched B2B data asset, promises strong scale benefits. It has created high switching costs, evidenced by customers' returns due to unreliable data elsewhere. Furthermore, the deployment of AI, particularly in their latest offering, the AI Copilot, sets to not only streamline marketing and sales efforts but also enhance the platform's worth as data gets enriched. Considering the conservative guidance for 2024, which leaves out the higher price points for AI-enhanced seats, an above-expectation revenue growth is anticipated. ZI is financially stable and industry-competitive, with an adjusted operating margin of 39% and ongoing aggressive share buyback. At a seemingly reasonable value, trading at 17.2x its unlevered free cash flow and with easing headwinds, it's an attractive buy with a 75% upside.

Ticker: ZI | Price: 18$ | Price target: 31$ | Timeframe: 36 months | Source: Seeking Alpha

🤖 Artificial Intelligence | 🚀 Strong Buy | 📈 Bullish idea

📝 Analysis: Dig deeper into this stock idea: Financials, valuation, moat analysis, timing, and more…

STOCK IDEA - Carasent

Carasent (CARA): Poised for Stronger Growth with Increased Sales Volumes and Controlled Costs

Carasent, traded in Norway, is highlighted as a promising investment due to its strong growth prospects, driven by increased sales and controlled costs. The Q4 2023 report revealed a 13% year-on-year increase in Annual Recurring Revenue (ARR) to NOK239m, with a revenue backlog of NOK8m showcasing sales momentum. Despite slightly lower margins, the period marked a record in new sales. With optimistic management and planned product launches in 2024, Carasent is expected to reach a positive EBITDA-CAPEX margin by late 2024. The valuation remains at NOK 11-43, with a base case of NOK 26. Investors are cautioned about the potential impact of a German acquisition, not included in the current estimates. Carasent's appeal lies in its ability to enhance healthcare processes and scalability, underpinned by its significant customer base and potential for network effects and customer loyalty.

Ticker: CARA | Price: 11 NOK | Price target: 26 NOK | Timeframe: 12 months | Source: Redeye

💻 Technology/Software Industry | 🚀 Growth Poised | 📈 Bullish idea

📝 Analysis: Dig deeper into this stock idea: Financials, valuation, moat analysis, timing, and more…

Disclaimer - Not Investment Advice

The content on Front Research is for informational purposes only and should not be considered as investment advice financial advice. One should always consult a qualified professional before making any investment decisions. Investments carry risks, including the potential loss of capital. Front Research and its authors bear no liability for decisions made based on the information provided here. All views are personal and not reflective of any company mentioned. Front Research, it’s affilaites, personnel, clients and/or partners might hold investments in securites discussed.

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