Apple’s App Store revenue climbs 16%, says Morgan Stanley

The analysts at Morgan Stanley are out with a positive report on App Store sales, claiming growth accelerated to its fastest rate in 5 months in September, up 16% year-on-year.

Outperforming, but headwinds remain

That’s an outperformance on the analyst’s original forecast and a boost to the company’s services segment. Morgan Stanley predicts Apple’s services income will be 2% higher than consensus data. They think Apple will deliver c.$18,080 million in its services segment, far ahead of the current consensus of $17,669 million.

These statements are based on information provided by Sensor Tower, Morgan Stanley said.

They note that nearly all of Apple’s ten biggest markets, which account for c.88% of total spending at the store, saw growth in September. Games sales in China were a particularly positive stop. Net revenue per download reached a record of $0.83/download, they said.

Overall, the analysts see final September quarter App Store net revenue growth of +13.3% outperforming the original +12.2% Y/Y forecast.

Components, regulation, competition may impact

There are some significant headwinds, Morgan Stanley said:

“While we remain keenly focused on the potential impact of recent App Store legal announcements and a recent article in the South China Morning Post here, there remain a number of important questions still outstanding (i.e. Will Apple appeal the injunction from Judge Rogers? Will app developers be allowed to charge different prices outside of the App Store?, etc.) and none of the major rulings will go into effect until early December, meaning it’s highly unlikely we see an impact from these rulings until the end of year/early next year, at the earliest.”

Morgan Stanley holds a $168 price target on Apple, warning that strong demand for iPhone may press this higher, while weak consumer spending, component shortages, competition and regulation may depress that figure over the coming months.

iPhone 13 seems to be seeing a strong release cycle

The report comes as multiple reports suggest Apple’s had good success with iPhone 13 this year, with one report claiming almost one-in-four existing iPhone users plan to invest in one of the new devices. More recently, a survey of US teenagers showed that 86% of the nearly 10k teens surveyed own an iPhone with 89% expecting an iPhone to be their next phone.

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