Apple App Store slows down in June on China weakness, Morgan Stanley says (NASDAQ:AAPL)

App Store icon on iphone 7

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The Apple (NASDAQ:AAPL) App Store slowed down in June, according to investment firm Morgan Stanley, as year-over-year declines in China outweighed “relatively solid performance” in the rest of the world.

Analyst Katy Huberty, who has an overweight rating on Apple (AAPL) shares and a $185 price target, noted that net revenue growth slowed to 2.5% year-over-year in June, compared to 4% growth in May, citing data from Sensor Tower. For the quarter, net revenue grew 5% year-over-year, below the firm’s estimate of 6% growth.

“With data from the month of June now finalized, we estimate June quarter App Store net revenue reached $6.5B, up 5% [year-over-year] or about $67M below our current forecast for 6% [year-over-year] growth,” Huberty wrote in a note to clients.

Apple (AAPL) shares fell slightly less than 0.5% to $138.30 in premarket trading on Tuesday.

Huberty pointed out that six of the top 10 largest markets for the App Store saw an acceleration in June, including the U.S., Australia and Germany, all of which grew more than 9% year-over-year. However, China’s weakness more than offset that growth.

Assuming other Apple Services revenue were not impacted, the firm estimates the segment could deliver $19.46B in revenue for the quarter, up 11.3% year-over-year, compared to the firm’s estimates of $19.53B and a consensus estimate of $19.71B.

Huberty noted that growth for the App Store could reaccelerate in the second-half of the year, as year-over-year comparisons get easier and China moves out of its Covid-related lockdowns.

On Friday, J.P. Morgan noted that near-term estimates for Apple (AAPL) have been “resilient” in light of recent economic uncertainties.

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