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Apple Stock Slumps As Morgan Stanley Cautions on App Store Impact to Q3 Revenues

Morgan Stanley analyst Katy Huberty says a 'broad based' slowdown in app store sales could hit Apple's Q3 revenues.

Updated at 11:19 am EST

Apple  (AAPL) - Get Apple Inc. Report shares slumped lower Friday after analysts at Morgan Stanley cautioned that the tech giant's App Store revenue is slowing, creating what it called 'downside risk" for services revenue growth over the current quarter.

Morgan Stanley analyst Katy Huberty, one of Wall Street's most-respected Apple watchers, noted that App Store revenues were up 6% from last year over the two months ending in May, but a tougher June comparison could mean Apple will struggle to meet its the bank's target of 15% net revenue growth for the quarter.

Huberty, who has an 'overweight' rating with a $195 price target on Apple stock, thinks app store revenue will speed up into the final months of the year. 

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Apple shares were marked 4.3% lower in early Friday trading to change hands at $144.63 each, a move that would extend the stock's year-to-date decline to around 20.5%.

Late last month, Bloomberg News reported that Apple is likely to keep 2022 iPhone production levels at around 220 million units, a figure that matches last year's tally, as supply chain disruptions and China's Covid lockdown impact supply and slowing global growth and Russia's war on Ukraine dampen demand.

Apple CEO Tim Cook told investors in April that Covid and supply chain disruptions around what he called the "Shanghai corridor", as well as Russia's war in Ukraine, would clip between $4 billion and $8 billion from current quarter revenues, marring an otherwise impressive second quarter earnings beat.

The Wall Street Journal has also reported that Apple, which makes by some estimates around 90% of its hardware products inside China, is looking to expand manufacturing hubs in India and Vietnam in order to both diversify its supply-chain and counter the impact of China's draconian Covid lockdowns.