Evercore ISI on Apple (AAPL) App Store Update: 'Deceleration Less than Feared'

Evercore ISI analyst Amit Daryanani reiterated an Outperform rating and $220.00 price target on Apple (NASDAQ: AAPL)

The analyst comments "App Store revenue grew +13% in the month of March with continued growth across all categories. This brings the quarterly growth rate to 13%, which could indicate some potential upside to Apple’s guidance for 11% Services growth in the Mar-qtr. The 13% growth rate in March is a deceleration from the 18% growth rate in the prior quarter, but the slowdown was not as large as feared. We thought we could potentially see single digits in March given the material step up in y/y comps. Comps do get slightly more challenging as we go through the Jun-qtr, but the strength of the March print increases our confidence that Apple can maintain App Store growth in the double digits. Critically, both gaming and China growth remain comfortably in the high-single digits. Gaming accounts for 52% of App Store revenue, so continued growth here will be key for the App Store’s ability to deliver an acceleration in 2024. Gaming was up 8% in March vs. 14% in February and -1% in January. All other categories grew in double digits with Music showing the strongest growth. On a geographic basis, China slowed to +7% vs. +10% last month and -5% in January. US and Japan also saw modest decelerations. Net/net: App Store numbers came in better than expected and increase our confidence that the Services business can meet/exceed revenue growth guidance for the Mar-qtr and maintain strength into the Jun-qtr. Maintain OP rating and $220 Price target."

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Shares of Apple closed at $170.03 yesterday.

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