UBS: Slowing App Store Growth May Cap Apple Services Upside

UBS said decelerating App Store revenue growth could limit upside to Apple's (AAPL:NASDAQ) Services segment, after data showed May growth slowing to the low single digits for the first time this year.

Rating Change

The report did not explicitly state a rating change for Apple stock, but the warning suggests a cautious view on the Services segment, which has been a key growth driver.

Analyst's Rationale

The UBS analyst believes that the slowdown in App Store revenue growth to low single digits in May is a concerning indicator, as the Services segment heavily relies on App Store revenue. This deceleration could limit the segment's ability to offset any decline in hardware sales.

Context

The warning comes after May data showed App Store growth slowing to its lowest level since the start of the year. In contrast, some other analysts remain optimistic about the Services segment, citing its diversified sources such as Apple Music and iCloud. Apple stock (AAPL) is currently trading near its all-time highs.

What to Make of It (Neutral)

UBS's warning highlights potential risks in the Services segment, but it does not necessarily imply an imminent downturn. Investors are advised to monitor monthly App Store data and upcoming earnings reports to assess the impact of this slowdown.