Ahead Of Apple Earnings, Apprehension Over Apps?

Wall Street waits with bated breath for Apple’s earnings. After all, a $1 trillion market cap implies hefty expectations for the tech giant. Amid a general downdraft in technology companies, investors fret about slowing growth, about interest rates, about the state of the mighty U.S. consumer headed into the holidays.

The iPhone will take center stage, of course, and there will be interest in average selling prices and whether the $999 tags will stick. There will be a spotlight trained on wearables, where the Apple Watch is, of course, the flagship. The Mac? Oh, yes, Apple makes computers, too, and the upgraded MacBook Air will be under discussion.

But beyond the headline numbers and the post-release swaying of shares – or maybe a rocketing up of stock prices or plummets of same – there may be a bit of the devil lurking in some details.

Consider the fact, as reported by Seeking Alpha, that one Wall Street sell-side analyst team – in this case, from Bank of America Merrill Lynch via analyst Wamsi Mohan – has found a slowdown in at least one piece of the Apple pie, where there is “marked deceleration” in the company’s App Store downloads and sales tied to October. Thus the impact will not be felt in the numbers reported for the quarter, but might merit some consideration moving forward.

Per the Bank of America write-up, revenue growth tied to App Store downloads has slipped to 11 percent in that month, as measured year over year, and off from 20 percent in September and 24 percent in August. The app data comes from Sensor Tower, according to reports. With some more granular insight, the analyst noted that App Store trends in China were also on the wane, with flat year-over-year revenue from a year ago in October and down from double-digit increases in previous months, as measured year over year.

Bank of America maintains a buy rating on the stock and a $235 price target.

Yet the deceleration could hit services revenues for Apple, and thus may be a headwind for overall top-line growth expectations of 25 percent, with a mitigating factor possible from licensing and Apple Care. Benzinga cites the report as stating that the slowdown seems a “surprise” amid the installed Apple user base, which in turn has been growing. Thus the anticipated fourth-quarter anticipation may be “somewhat aggressive,” according to the analyst.