Evercore: For First Time Since 2008, App Store Shows No Growth

02 AUGUST 2022 - On last week’s June-quarter earnings call, Apple CFO Luca Maestri said that revenue for Apple’s Services segment would grow in the September-quarter, though he warned that that growth will slow compared to the June-quarter. And the world is seeing signs of it.

Apple 3.0 ran part of a note Monday from Evercore analyst Amit Daryanani. By his firm’s reckoning, “The App Store did not grow in July, the first month without growth since the Store’s inception.” Time to freak out? Daryanani does not think so. Quoting his note:

The slowdown should be well understood by investors as the App Store grew only 5% in the Jun-qtr and Apple guidance indicated Services growth should decelerate further in the Sept-qtr. The App Store remains the largest component of services revenue, but it has become less important to the overall services growth rate and Apple was able to post 12% Services growth in June-qtr despite App Store growth of just 5%. New opportunities (payments, advertising) are becoming more significant drivers of growth. (emphasis his)

So, kind of like when iPod sales fell off a cliff. Something else was there to more than pick up the slack.

Two things could/should re-start growth for the App Store: “material improvement out of China,” and/or getting through the tough compares that’ll run through the December-quarter. Additionally, Apple’s warning of slowing Services growth should save the company from a hard freakout.

Daryanani has an “Outperform” rating on Apple shares. His price target on the shares is $180.