From a note to clients by analyst Samik Chatterjee that landed on my desktop Monday:
Apple’s App Store gross revenue and downloads, as tracked by Sensor Tower, returned to a robust level of growth in F4Q19 (Sep-end) following a slowdown in the last three quarters following a freeze on gaming approvals in China in early 2019. While app approvals in China are still only at a more moderate pace relative to the pace prior to the pause, we are seeing the growth rates in non-gaming apps accelerate from late 2018/early 2019, which is driving an acceleration in growth trends for total app downloads from the iOS App Store. The positive quarterly App Store gross revenue and download trends support our expectations for a reacceleration in Apple’s Services revenues to roughly mid-teens growth in F4Q19 relative to the recent low of +13% y/y in F3Q19. Additionally, the revitalization of growth in the App Store in conjunction with the ramp of a slew of new services (e.g. Apple TV+, Apple Arcade) increases our confidence in the sustainability of mid-teens Services revenue growth in the coming years.
- App Store downloads increase mid-single digits in F4Q19; return to growth on a year-to-date basis. As illustrated in Figure 1: Apple's App Store Downloads in Billions, Y/Y % Change
- App Store gross revenue returns to 20%+ growth for the first time in three quarters. As illustrated in Figure 2. Apple's App Store Gross Revenue $ in Billions, Y/Y % Change
Maintains Overweight rating and $265 price target.
My take: First I've heard of this acceleration in non-game apps.