Morgan Stanley: Apple App Store sales are booming

Apple product users have been spending a lot more time and money in the App Store during the COVID-19 pandemic shutdowns. Apple App Store sales climbed 35% in the first two months of Apple’s third quarter, Morgan Stanley analyst Katy Huberty estimates.

App Store
Apple’s App Store

Adam Levy for The Motley Fool:

Importantly, growth accelerated from April to May, even as economies started to reopen.

“High levels of engagement have sustained as the ‘new normal’ (at least in the near-to-medium-term) includes more time spent indoors, which should remain a tailwind to App Store performance,” Huberty wrote in a note to investors.

Overall, Huberty expects strong App Store sales to lead to a 16.7% increase in services revenue for Apple versus the 12% she previously modeled. That’s over $500 million in additional revenue. Considering that the App Store is one of Apple’s highest margin services, that revenue will likely produce a profit margin well above Apple’s average services gross margin of about 65%…

Huberty sees the surge in App Store revenue as having a sustained effect on Apple’s bottom line. She sees earnings per share of $1.99 for the June quarter… versus her prior estimate of $1.92. Importantly, she also sees the September quarter getting a similar boost in earnings, indicating sustained App Store spending at least through the rest of Apple’s fiscal year.

MacDailyNews Take: A silver lining to the dark cloud 2020 have been so far is that it led a lot of Mac, iPhone, iPad, Apple TV, Apple Watch, and iPod touch users to discover or rediscover Apple’s respective App Stores!


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