Get ready for some tough compares, warns analyst Amit Daryanani.
From a note to clients that landed on my desktop Wednesday:
All You Need to Know: App Store growth slowed in May against tough comps (App Store revenue was +39% in May-20). We estimate total App Store developer revenue grew to ~$4.9bn in May; up 13% Y/Y (vs. +18% in April, +31% in March).
The deceleration was primarily driven by a slowdown in gaming revenue as we lap the benefits from last year’s COVID shutdowns. Revenue in the App Stores top 10 countries was up 21%, indicating the slowdown was more acute in smaller markets. Street models are calling for Services revenue growth to decelerate to 23% y/y in the June-qtr, down from 27% in the Mar-qtr. This deceleration looks appropriate as App Store revenue will likely be high teens to low 20s growth.
The App Store is facing difficult comps after reporting +33% growth in June-20. Apple care is another component of the Services business that will likely slow down as it tends to be relatively correlated to iPhone sales. From a geographic perspective, Japan was the slowest growing major market at +7%, while both the US (+29%) and China (+21%) outperformed the broader market.
Net/Net: Services growth looks set to decelerate as we come up against some difficult comps. Longer-term, we remain confident in our call for high-teens annual services growth.
Maintains Outperform rating and $175 target.
Cue the chart:
My take: Y/Y growth may have plummeted, but it’s still in positive territory,
2021 growth was 44% over 2019.
Thanks for helping to place focus where focus should be placed.
As Gregg Thurman stated previously — “It’s all in the telling.”
More important — what gets told.
Too many folk believe the 5G super cycle is a one year event. Some believe it is a two year event. Others believe it is a three year event. My personal belief is that 5G is a multi-year event and I do not see iPhone sales slowing overall. Few people I know got the iPhone 12. Many are waiting for the 13 and some for the year after. To my knowledge, we still have no 5G coverage in my state. So, beyond being a professional photographer or a photographer aficionado there is little incentive for most folk to rush out in many parts of the country to upgrade to 5G.
Also, Apple and TSMC have breakthroughs in storage and display technology that will not only….
1) Drive upgrades across all Apple device in the next five years; But also
2) Expand Apple technology and user experience lead across the portfolio; And
3) Drive services growth with the device sales growth.