Why One Apple Analyst Is Cautious on Devices and App Store Growth

By Chris Lange Updated Jan 30, 10:31PM EST · Published Apr 3, 1:55PM EDT

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Why One Apple Analyst Is Cautious on Devices and App Store Growth — © Nikada / Getty Images

Apple Inc. (NASDAQ: AAPL | AAPL Price Prediction) has made some serious headway over the past month, begging the question whether the stock has run too much. One analyst thinks so. Nomura released a report in which it notes iPhone price concessions have not yet bolstered unit sales and App Store growth appears to be slowing.

Nomura reiterated a Neutral rating with a $170 price target, implying a downside of 12.4% from the most recent closing price of $194.02.

The firm does not believe higher trade-in incentives or price reductions to balance FX changes have lifted demand. Also, through February Apple has production continued to underperform a soft China market. Nomura’s U.S. checks suggest near record low replacement demand. The supply chain has not seen an improvement; Nomura’s Taiwan Tech colleague Anne Lee lowered her fiscal 2019 iPhone production forecast from 195 million to 180 million.

[nativounit]

According to Nomura’s report:

Our SensorTower work indicates App Store growth slowed to just 15% through February, which is down from 18% in F1Q despite a restoration in China gaming approvals. Slowing unit demand and ASP growth should restrain AppleCare; slowing subscriber growth should limit search licensing sales. Despite our optimism for Apple News+, we hold our Services growth estimate to 19%. We suspect Services margins will blend lower.

Nomura estimates the growth in Apple’s iPhone base has slowed from about 13% in 2017 to 9% today. Slowing sub growth has weighed on Pandora, Zynga, Twitter, BlackBerry and Snap; Netflix and Facebook have overcome the headwind by pivoting to new models. The firm views Apple’s new services as an effort to better monetize its 900 million iPhone user base, particularly in the United States.

As a result, Nomura lowered its fiscal 2019 estimates to $11.32 in earnings per share (EPS) and $253 billion in revenue, from $11.60 in EPS and $257 billion in revenue. Consensus estimates call for $11.40 in EPS and $255.2 billion in revenue.

Shares of Apple were last seen up about 1% at $195.68, in a 52-week range of $142.00 to $233.47. The consensus price target is $180.85.

[recirclink id=538844]

[wallst_email_signup]

DISCLOSURE:

Customer must fund their Active Invest account with at least $50 within 45 days of opening the account. Receive a minimum of $15. Probability of member receiving $3,000 is a probability of 0.026% If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Percentages for the $3,000 are subject to decrease. See full terms and conditions.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA(www.finra.org)/SIPC(www.sipc.org). Advisory services are offered by SoFi Wealth LLC, an SEC-registered investment adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov. Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 30 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Other fees, such as exchange fees, may apply. Please view our fee disclosure to view a full listing of fees. Investing in alternative investments and/or strategies may not be suitable for all investors and involves unique risks, including the risk of loss. An investor should consider their individual circumstances and any investment information, such as a prospectus, prior to investing. Interval Funds are illiquid instruments, the ability to trade on your timeline may be restricted. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA(www.finra.org) /SIPC(www.sipc.org). There are limitations with fractional shares to consider before investing. During market hours fractional share orders are transmitted immediately in the order received. There may be system delays from receipt of your order until execution and market conditions may adversely impact execution prices. Outside of market hours orders are received on a not held basis and will be aggregated for each security then executed in the morning trade window of the next business day at market open. Share will be delivered at an average price received for executing the securities through a single batched order. Fractional shares may not be transferred to another firm. Fractional shares will be sold when a transfer or closure request is initiated. Please consider that selling securities is a taxable event. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire investment Before trading options please review the Characteristics and Risks of Standardized Options Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement This should not be considered a recommendation to participate in IPOs and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation. New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For more information on the allocation process please visit IPO Allocation.

Follow 24/7 Wall St. on Google

About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.