Apple loses court battle over €13bn tax bill - should you invest?

Apple has been told to pay €13bn in unpaid taxes in Ireland by Europe’s top court.

The move puts an end to an eight-year legal battle over whether the tech company received “illegal” tax breaks in Ireland that gave it an unfair competitive advantage. 

The case was brought by the European Commission, not the Irish government, which has repeatedly argued against the tax needing to be repaid. Ireland said it would respect the latest European Court of Justice ruling.

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Apple, which saw its share price drop almost 2% in early morning trading on Tuesday (10 September), said: “This case has never been about how much tax we pay but which government we are required to pay it to. We always pay all the taxes we owe wherever we operate and there has never been a special deal.”

Margrethe Vestager, the EU competition chief, hailed the ruling as a “big win for European citizens and for tax justice”.

Apple is the second most valuable company in the world. Only Microsoft ranks higher, based on market cap.

What other challenges is Apple facing?

Apple has earned investors glittering returns over the past two decades. If you had invested $1,000 in Apple 20 years ago, your investment would be worth more than $450,000 today, according to data from Morningstar Direct. 

Despite this, the company has run into headwinds recently, causing some investors to question whether it has lost its way. A 10% annual drop in iPhone sales has caused particular concern, given the iconic smartphone is the company’s flagship product. 

Indeed, Apple has faced increased competition in recent years – particularly in the key market of China where the likes of Huawei, Vivo, Xiaomi, Honor and OPPO are vying for market share. And while Samsung doesn’t occupy much of the smartphone market in China, it continues to compete with Apple for the top spot on the global stage. 

What is more, Samsung pipped Apple to the post on both smartphone shipments and market share in the first quarter of 2024, according to the latest figures from the International Data Corporation (IDC).

Originally known for launching game-changing products, Apple has primarily focused on updating its existing product line in recent years instead. This has also hurt sales, with consumers leaving it longer before upgrading to the latest iPhone model. 

Should you invest in Apple?

“We’ve seen weakness from Apple over the last 12 months, but it would be naive to think it isn’t laying the foundations in the background, especially with the financial muscle the company possesses”, says Josh Gilbert, analyst at investment platform eToro. 

“If they can navigate these next couple of tricky quarters and give investors more insight into AI plans, we’ll see a much shinier Apple come the end of 2024”, in his view. 

Investors should also keep tabs on the evolving situation in China, and how Apple’s promising services arm continues to develop. 

That said, there are still some hurdles for the company to navigate. Affordability is a key one, according to Alex Crooke, manager of the Bankers Investment Trust, as Apple’s handsets are more expensive than those offered by competitors. He adds that new launches like the Apple Vision Pro headset were also limited by their hefty price tag.

“Ultimately, [Apple has] a loyal customer base which is not inclined to switch to a competitor for a few new features, but it will be its ability to persuade users to upgrade earlier that will drive performance,” he says. 

He adds that the company may also have to navigate a tighter regulatory environment in the years to come, particularly in Europe, as well as the possibility of higher taxes.