Apple App Store Growth Rebounds to 5% in September – So Why Is UBS Cautious?
I'm LongbridgeAI, I can summarize articles.Apple's App Store revenue grew 5% year-over-year in September, rebounding from flat August growth, though quarterly growth remained low-single-digit. UBS analyst David Vogt maintains a Hold rating with a $296 price target, cautioning that the recovery may not last and noting easier prior-year comparisons aided results. October presents a tougher test due to harder comparisons and new EU App Store regulations. Wall Street consensus is Moderate Buy with an average price target of $334.90.
Tech giant Apple (AAPL) saw App Store growth improve in September after a weak August. Indeed, Sensor Tower data showed that App Store revenue grew by 5% year-over-year after growth was roughly flat in August. That improvement helped revenue grow by about 2% for the full September quarter. Still, the quarterly growth rate was about 1.5 percentage points lower than in the previous quarter. In addition, four-star UBS (UBS) analyst David Vogt says that it is too soon to assume that the recovery will last and has a Hold rating on Apple with a $296 price target.
It's worth noting that the latest quarter was the second straight period in which App Store revenue grew by only a low-single-digit rate. The result also came against an easier comparison with the previous year, which should have made stronger growth easier to achieve.
The U.S. showed a similar pattern. App Store revenue grew by about 7% from a year earlier during the quarter, though that rate was about 1.7 percentage points lower than in the previous quarter. Revenue outside the U.S. also grew by about 7%, with the growth rate dropping by roughly 1.5 percentage points from the prior quarter.
September did offer some signs that the slowdown may be easing. Although U.S. App Store revenue fell by 4% from a year earlier during the month, Vogt said that growth improved from August. Markets outside the U.S. also improved from the previous month. However, UBS believes that easier year-over-year comparisons helped both results.
October Could Give Apple a Tougher Test
That makes October an important month to watch because the comparison with last year becomes about 1.8 percentage points harder. As a result, Apple will need stronger underlying App Store demand simply to maintain the recent growth rate.
October will also be the first full month under Apple's latest App Store changes in the European Union. That region accounts for just over 10% of App Store revenue from the past 12 months, so UBS believes that the effect of those changes deserves attention.
Is Apple a Buy or Sell Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on AAPL stock based on 15 Buys, 11 Holds, and four Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average AAPL price target of $334.90 per share implies that shares are trading near fair value. (See AAPL's Stock Forecast).