Moscow, April 15 — “News. Economy” the Number of downloads in the app store the Apple App Store has decreased, perhaps for the first time, a research of Morgan Stanley. Apple has recently ceased to provide data on the sales of devices, suggesting to pay attention only on achieving revenue figures.
Apple service business, which includes apps, music, and iTunes, is a key source of income, as the company had hoped, offset the decline in sales of mobile phones. But here’s the thing — revenue growth in App Store too is slowing down.
According to data collected by Morgan Stanley analyst Katy Huberty, download applications from the Apple App Store fell for the first time in four years, and perhaps even for the first time in history. According to analyst Nomura Instinet Jeffrey Kvaal, the decline in downloads is due to the fact that iPhone sales will shrink by 20% in the first finkvartal Apple.
This trend should worry Apple, which hopes that the decline in sales of the devices will be offset by increased sales of services including App Store.
Apple CEO Tim cook told investors in November 2018 that the company will cease to provide data on the sales of smartphones. The move was interpreted as an attempt to divert attention from the scale of the decline in sales of the iPhone. More new iPhone models come with even higher prices on the market, which almost reached saturation.
Instead, Apple wants investors to look at total revenues that are generated by each business unit. In theory, even with a decrease in sales of the new iPhone, the total number of smartphones Apple (the so-called “installed base” or “installed user base” — the number of units of this type of product that was sold and used by users) will continue to grow. While Apple can sell these customers more videos, music in iTunes and apps, Apple can continue to increase revenues.
However, the decline in app downloads does not help this theory. With the decrease in the number of downloads, the revenue growth is slowing.
Huberty in a note to clients notes that total revenue from services and apps in the Apple’s still growing: “Despite the fact that investors should follow the reduce downloads, it is not necessarily an indicator of the started trend of app usage, as net income of the App Store more correlated with purchases in the applications, not the absolute level of downloads. And faster growth of expenses in the applications in this quarter shows that the involvement of the audience in the application is still at the proper level.”
But, according to Huberty, the growth rate of income in the App Store went into decline. According to Sensor Tower, App Store revenue in March amounted to $ 3.7 billion in annual comparison, the increase amounted to 15%, which is 1 percentage point lower than in December.
The decline comes amid debate among analysts about the strength of the installed base of Apple. In its latest quarterly earnings report CFO Luca Maestri said that currently in active use is 900 million iPhones.
Earlier analysts, such as Timothy Arcuri Cowen (now UBS), believed that the installed base will create a “super cycle” of buyers for the new iPhone. It is assumed that the aging of the used phones more and more users will tend to upgrade to the new model. But the “super cycle” of buyers did not arise.
Other analysts, however, believe that the installed base only hurts new sales. Bernstein analyst Toni Sacconaghi spoke earlier on this subject, stating that, for example, iPhone owners have long to use them. Over the past year, the average holding period of iPhone has increased to four years. The expert believes that Apple itself has set itself the bandwagon by starting a massive program to replace batteries of iPhone at a reduced price. Thus, it has breathed new life into used smartphones, after which those who thought about an upgrade, decided to keep a smartphone for some time.
Analysts at UBS believe that 900 million devices — a big enough figure to suggest that the growth of the user base is close to zero — in the world there are fewer new users who want to buy a iPhone.
Analysts at HSBC Securities downgraded Apple stock to “Reduce” from “Hold” because of concerns that its shift to services will have lower margins and new offers, including streaming video service, will not justify expectations. “The recent announcements of features make the Apple to financially support their aspirations, but in order to generate income, she may need some time,” said analyst Erwan Ramburg in his report to clients on Wednesday.
“Although the new suggestions can attract the attention of consumers, we do not expect that these services will significantly affect the course of the game. We believe that Apple is too late decided to join the game, and it offers, in General, are not very different or inferior to competitors ‘offers”.
The analyst also noted that the service business of the company is likely to be less successful in attracting and retaining customers in the emerging markets than in the United States.
“Generating cash and likely exceeded the expectations results in the next quarter after lowering its forecasts due to falling sales of the iPhone in China in the beginning of the year will force some investors to think that the current valuation Apple is adequate,” said Ramburg.
“We are convinced that, after increasing 41% compared to the lows of January 2019, and given the optimism/satisfaction in relation to announcements of services and the ratings from analysts “sell-side”, now there is some potential to reduce cost,” he added.
Read more •••