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Morgan Stanley says App Store and iPhone builds suggest upside to Apple estimates

Published 21/06/2024, 12:10
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Morgan Stanley analysts say their latest data points to a potential upside to Apple's (NASDAQ:AAPL) estimates.

The firm said in a note Friday that "App Store net revenue growth is tracking +13.5% Y/Y MTD and +13.3% Y/Y QTD, implying 2 pts of upside vs. our C2Q 13.3% Services growth forecast."

The bank says this suggests that Apple's Services segment, which includes the App Store, could perform better than anticipated.

The data source for this optimism is Morgan Stanley's IT Hardware Data Tracker, which includes information on App Store revenue and iPhone builds.

According to Morgan Stanley, App Store net revenue is currently up 13.5% year-over-year (Y/Y) for the month-to-date (MTD) period ending June 15th. This translates to an estimated 13.3% growth for the entire quarter, exceeding Morgan Stanley's prior forecast of 7% Y/Y.

"Assuming the quarter ended today, we estimate the App Store would be growing 13.3% Y/Y QTD, 6 points (or $422M) ahead of our 7% Y/Y June quarter forecast," the bank wrote. This translates to a potential 2 percentage point upside to their previous Services growth forecast of 13.3% Y/Y.

Beyond the App Store, Morgan Stanley analysts also see positive signs for iPhone shipments. Their latest data suggests iPhone builds for the September quarter are at 52 million units, significantly higher than their prior forecast of 45 million. This points to a potential 16% upside in iPhone shipments compared to their initial estimate.

"The factors driving above-seasonal iPhone builds in the quarter include 1) late-cycle strength in iPhone 15 Pro/Pro Max models post WWDC, and 2) XM iPhone 16 family builds in C3Q24, up 9% Y/Y vs. iPhone 15 family builds in C3Q23," the analysts explained.

Overall, Morgan Stanley's data suggests potentially positive surprises, particularly for its Services segment and iPhone shipments.

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