Morgan Stanley: Apple’s App Store grew another 30% year over year in October

Two charts from a note to clients by analyst Katy Huberty that landed on my desktop Tuesday:

According to preliminary data from Sensor Tower, total App Store net revenue reached $1.9B in October 2020, up 30.5% Y/Y (Exhibit 1), a 240bps acceleration from September 2020 growth of 28.1% and largely in-line with C3Q20 App Store net revenue growth of 31.2% Y/Y.

Results continue to be broad based, with all of the App Store’s 10 largest markets growing at least 22% Y/Y in October (Exhibit 2).

Cue Exhibits 1 and 2:

apple app store morgan stanley

apple app store morgan stanley

Maintains Overweight rating and $136 price target.

My take: So much for Steve Jobs’ plan to run the store on a break even basis.

11 Comments

  1. Brian Loftus said:
    It is growing 30% per year as indicated by comparing monthly Data. 30% per month would be 23x per year.

    1
    November 3, 2020
  2. Fred Stein said:
    Spoiler alert: grade school arithmetic.

    We’re approaching $24B p.a. At 30% YoY, we’d be at $33B in 15 months, which is the earliest data that any .gov intervention on the Google/Apple licensing could take place.

    33 – 25 = $9B which is approx the amount (according to un-named sources) that Apple gets from Google.

    Thanks Katy

    1
    November 3, 2020
    • Robert Paul Leitao said:
      @Fred Thanks for the math! A little off-topic but tying into your point: If Apple’s “doesn’t need” Google’s revenue from the default search slot, how might Apple craft its own search engine and tie it into the company’s privacy/security imperative?

      In other words, could Apple do search different(ly), foregoing the cash in favor extending the company’s approach to user privacy? Would that have real appeal to device owners? You are an active commenter on PED30 and I value your views. The questions is of course open to everyone.

      1
      November 3, 2020
      • Gregg Thurman said:
        how might Apple craft its own search engine and tie it into the company’s privacy/security imperative?

        I don’t see Apple going head to head with Google over search.

        Just as Kleenex is to facial tissue, and Xerox is to dry copying,, and McDonalds is to hamburgers, Google is to search.

        Google is top of mind in search, not because its significantly better than other search engines (competitors have mostly caught up), but because of its name. Today the word Google means search.

        Apples only saving grace in search is a potential default position in iOS. But that would very likely result in an Internet Explorer type anti-trust action.

        I don’t see it happening.

        0
        November 4, 2020
  3. Robert Paul Leitao said:
    I’m interested in knowing the rise in App Store net revenue from 3rd-party content providers picking up subscriptions through Apple and what positive impact on the growth rate, if any, in October from the recent reversal of FX headwinds.

    No matter the answers to those questions, I expect the pace of App Store net revenue growth to be positively influenced by the rate of upgrades from legacy iPhones to the iPhone 12 series handsets. The better the handset, the greater the level of user engagement. The average age of an iPhone in use has likely passed its peak.

    0
    November 3, 2020
  4. Gregg Thurman said:
    While standing in line to vote this morning I got into a conversation with the person ahead of me. The topic? His smartphone. I didn’t recognize and asked. It’s the current iPhone SE and is the first new iPhone he has purchased in 4 years.

    Off topic, election workers state that as of Saturday 70% (a record) of ballots mailed out have been returned. In Spokane ballots are mailed out to every registered voter without being asked.

    Still it took me about an hour to vote, even though the process was well organized and efficient. My estimate: there were more than 300 voters in some stage of the process at any given time. The line had not shortened by the time I left.

    0
    November 3, 2020
    • Gregg Thurman said:
      No matter the result I think this election’s turnout is fantastic.

      Now if only we could get a clear winner and stop the legal infighting.

      1
      November 3, 2020
    • Robert Paul Leitao said:
      Gregg: Do you see greater content consumption trends as consumers upgrade from older handsets? Did you ask the person you were conversing with at the polling place whether or not they had considered an Apple One bundle? What was the person’s view of the new iPhone SE now that they have been using it?

      0
      November 3, 2020
      • Gregg Thurman said:
        He was very pleased with battery life (better than original SE when it was new) and loves the processor speeds. Downloads are much faster on the same LTE network.

        I neglected to ask about Services. I missed a great opportunity to learn more about Services adoption from an upgrade user.

        As an aside I signed up for Apple One Premium (Family plan) today. It was a no brained.

        0
        November 4, 2020
        • Robert Paul Leitao said:
          Gregg:

          Thanks for the reply. I also consider Apple One to be a real value proposition. Rolled out pretty much in tandem with the iPhone 12, I’m expecting very strong Services revenue growth in the latter half of the December quarter and for the entire March quarter.

          0
          November 4, 2020

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