The 32% pop in China last month may be a “quarantine uptick,” says analyst Amit Daryanani.
From a note to clients that landed on my desktop Monday:
ALL YOU NEED TO KNOW: Our analysis suggests that App Store revenue growth accelerated to 20%+ after two sub-20% months. We estimate total App Store developer revenue grew to ~$3.6bn in January; up 23% Y/Y (vs. +16% in Dec, +17% in Nov).
China’s 32% y/y growth was the key factor in driving the acceleration for the month of Jan. Notably, this is a significant step up from China’s ~17% growth rate in CY19. In CQ4:19 we noted gaming revenue growth slowed to around 12% likely due to the impact of Apple Arcade; however, gaming revenue grew ~21%, so we have not seen that dynamic continue into January. It’s possible we are seeing a bit of “quarantine” uptick as a large portion of China’s consumers are likely spending far more time indoors. Outside of China, we saw trends improve in most countries with Japan inflecting back to positive growth after two months of declines. Notably, numerous countries reported the highest growth rates we have seen in 12+ months including: UK (+30%), Taiwan (+38%), Korea (+38%), Canada (+33%).
Net/Net: Growth returning to a 20%+ rate should help alleviate concerns about a potential deceleration in services growth.
Maintains outperform rating and $365 price target.
My take: Month-over-month gaming data right after the holidays may not be the most useful measure.