Apple Stock: The growth engine for Apple Services are stagnant

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The largest component of the services business, the App Store, stopped growing last month, Evercore ISI analyst Amit Daryanani said in a note to clients Monday. Still, he rates Apple stock as outperform with a price target of 185. On the stock market today, Apple stock fell 0.9% to close at 160.01.

For years, Apple’s (AAPL) enormous services division has been a source of pride for the consumer electronics behemoth, contributing to quarterly earnings gains. However, the unit’s growth is currently decreasing, which is problematic for Apple stock. Apple services revenue increased by 12 percent to $19.6 billion in the June quarter, making up approximately 24 percent of the company’s overall sales. However, that is less than the 24 percent rise in the December quarter and the 17 percent growth in the March quarter. Additionally, Apple anticipates that the unit’s growth will slow down even more in the upcoming quarter.

Highlights

  • Other Apple services include AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+, Apple Arcade and other offerings. Apple stock has been consolidating for the past 31 weeks with a buy point of 183.04, according to IBD MarketSmith charts. Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

  • Apple Stock Consolidating. “The App Store did not grow in July, the first month without growth since the Store’s inception,” Daryanani said. App Store sales rose just 5% in Apple’s fiscal third quarter ended June 25, he said. Meanwhile, the App Store is facing regulatory challenges worldwide that could negatively impact sales, he said. “The App Store remains the largest component of services revenue, but it has become less important to the overall services growth rate,” Daryanani said. “New opportunities (payments, advertising) are becoming more significant drivers of growth.”

 

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