Apple’s App Store
Despite other investment analysts downgrading Apple, Evercore is more positive and is maintaining a $220 stock price target because of the continued growth of the App Store.
Evercore has previously been positive on Apple because of what, in 2020, it described as the firm benefiting from a “confluence of strong iPhone 11 trends, wearables momentum and continued services traction.”
Now according to a new note seen by Apple-centric finance site Apple 3.0, Evercore is maintaining its existing price target but specifically because of its research into App Store growth. For Q4 2023, Evercore says that Apple’s App Store grew by 10% — and also that revenues for solely the month of December were also up by 10%.
This follows a 9% growth rate for the month of November 2023, and Evercore says that there was a continued broad strength across all categories. Significantly, though, gaming by itself grew 5% in December, compared to a 3% growth the month before.
Evercore claims that gaming accounts for 54% of App Store revenue. “We think this sets up 2024 to also sustain positive growth,” writes its analysts.
Reportedly, entertainment — which Evercore says chiefly concerns streaming — grew 17% over the year, and 36% in the last two months. Social media apps brought in 9%, which is down from 12% the year before.
Evercore says that there are differences across the globe, though. China’s App Store grew 10%, while Japan’s fell 2%, year over year. The US App Store grew 7% year over year, which is fractionally down on the year before’s 8% growth.
Financial doom and gloom predicted for Apple
These App Store growth reports paint a rosier picture for Apple than other analysts currently believe. Given how significant the iPhone is to the company, Barclays’ claim that the iPhone 16 will have no compelling new features, saw the firm’s market share fall.
If correct, the predictions of falling iPhone demand from other analysts could put a limit on the App Store’s growth. But analysts have previously also said that around 25% of Apple’s 1.2 billion users have not upgraded their iPhone in 4 years, meaning that it’s likely significant numbers will upgrade at some point.
Perhaps users entirely new to the iPhone are likely to buy more apps than existing customers, but the market remains large and perhaps especially so for key titles such as new games.
Future App Store issues
Separately, since October 2023, China’s App Store has been affected by new laws that are likely to decrease the number of apps being added. While Apple initially resisted the change, it now requires new apps to show that the developer has a license from the Chinese government.
There may also be a change in App Store revenues in Europe, as the European Union enforces its requirement that Apple allow users to buy apps through alternative stores.
Apple has strongly resisted third-party app stores, with head of software engineering Craig Federighi going so far as to blast Mac security, in order to stress how important it is to keep the App Store a closed system. The idea is that if iPhone users can buy apps from anywhere, it’s unlikely that the apps will have gone through what Apple describes as its rigorous vetting system.
Others have said that in practice it’s easy to get a fraudulent apps through the official App Store review process. However, it’s still the case that Apple at least attempts to ensure that iPhone users are not subjected to malicious apps.
It remains to be seen, though, how many developers will elect to use third-party alternative app stores to reach customers. At present, Apple handles all of the logistics of a worldwide app store, plus all of the global taxation requirements. It’s unlikely that any but the largest developer firms will find it economically feasible to take on any of this.
