Morgan Stanley Tracks 1% Growth for App Store in July
04 AUGUST 2022 - Good news …ish… for Apple investors. Seeking Alpha has Morgan Staley analyst Erik Woodring saying that App Store growth slowed to 1% last month versus the same month a year ago. You may wonder why that’s good news. Well it’s not really, until you remember Evercore analyst Amit Daryanani saying earlier this week that July marked the first zero-growth month for the App Store since its launch 14-years ago.
In your face… whoever’s wrong…
Neither one seems freaked by the slow-or-no-growth prospect, though Woodring seems both more optimistic and more pessimistic - like he’s setting himself up for disappointment. Evercore’s Daryanani seems pretty settled on a serious slowing of App Store growth until either something happens to goose sales in China or Apple glides into easier compares after the December-quarter. Similarly, though with a twist, Woodring’s latest note says:
With App Store [year-over-year] comps flat from July to August, but ~6 points tougher in September, we believe an acceleration in growth largely hinges on the strength of consumer spending (…) and demand for digital services in China as spending patterns normalize post lockdowns…
So, he doesn’t seem as settled on slow-to-no-growth as Daryanani. That said, Seeking Alpha does have Woodring noting that App Store growth “is skewed to the downside” this quarter. Still, he has higher hopes than one might expect. Quoting Seeking Alpha:
If the quarter ended with just 1% year-over-year growth in the App Store, that could impact Apple's all-important services revenue, which Morgan Stanley estimates will grow 10% year-over-year in the coming quarter.
This may be where he’s setting himself up for disappointment. On the June-quarter earnings call, it was Woodring himself who asked a question about Services growth in the current quarter - specifically, will the category maintain double-digit growth? CFO Maestri didn’t say “no.” What he did say was that growth for services last quarter was 12%. Apple’s going to see a 6% impact from foreign exchange year-on-year. Then there’s the whole Russia thing. Somehow Woodring hears that answer and still expects double-digit growth.
People are funny.
Woodring has a positive rating on Apple shares. Morgan Stanley’s price target on the shares is $180.
