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Apple Allowed To Block Fortnite From App Store Amid Dispute

support@smarteranalyst.com (Ben Mahaney)
·3 mins read

Apple Inc. won’t be forced to put popular video game Fortnite back in its App Store after a US federal court denied a preliminary injection filed by Epic Games.

In this motion for preliminary injunction, Epic Games had asked the court to force Apple (AAPL) to reinstate Fortnite to its App Store, while the game developer continues its antitrust dispute against the iPhone maker. This is despite its acknowledged breach of its licensing agreements and operating guidelines. The game developer also demanded that that Apple refrains from terminating its affiliates’ access to developer tools for other applications, including Unreal Engine, while it litigates its claims.

“The Court maintains its findings from the temporary restraining order and hereby grants in part and denies in part Epic Games’ motion for a preliminary injunction,” District Judge Yvonne Gonzalez Rogers wrote in the ruling. “Epic Games has strong arguments regarding Apple’s exclusive distribution through the iOS App Store, and the in-app purchase (IAP) system through which Apple takes 30% of certain IAP payments.”

“However, given the limited record, Epic Games has not sufficiently addressed Apple’s counter arguments,” Rogers wrote.

The dispute picked up speed back in August, when Apple announced the termination of Epic Games’ account on its App Store and the removal of the Fortnite game. This means Epic is no longer able to submit new apps or updates, and the game can no longer be downloaded or re-downloaded. The dispute hinges on Epic’s use of direct in-game payments in the Fortnite app. Apple’s rules state all purchases must be made through its proprietary payment system.

"We're grateful the court recognized that Epic's actions were not in the best interests of its own customers and that any problems they may have encountered were of their own making when they breached their agreement," Apple said in a statement. "For 12 years, the App Store has been an economic miracle, creating transformative business opportunities for developers large and small. We look forward to sharing this legacy of innovation and dynamism with the court next year."

Separately, the court put out an order to set a new date for Apple and Epic Games to face each other in court on May 3, 2021, instead of the previously anticipated July date.

"We will continue to develop for iOS and Mac under the court's protection, and we will pursue all avenues to end Apple's anti-competitive behavior," Epic Games said in a statement.

Wedbush analyst Daniel Ives last week reiterated a Buy rating on Apple stock with a $150 price target, saying that the ongoing Epic court battle will be another focus area for the Street to see the company defend its 30% fee and App Store moat.

“Th golden jewel App Store continues to be in the crosshairs. From an investor perspective, the key services business and its $60 billion+ annual revenue stream for FY21 remain what we estimate is a $900 billion+ valuation alone for this business and key to future monetization efforts with more bundling efforts on the horizon,” Ives wrote in a note to investors. “This clearly hits on the ongoing Epic court battle issue with the 30% fee that Apple charges developers as part of its stronghold App Store, which is timely in light of anti-trust swirls and growing opposition to Big Tech.” (See Apple stock analysis on TipRanks)

Overall, based on 24 Buys, 8 Holds and 3 Sells, the analyst consensus rates Apple a Moderate Buy. The average analyst price target clocks in at $122.06, implying upside potential of 4.4% in the coming months. Shares in AAPL have surged 59% so far year-to-date.

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