Coronavirus could have a surprisingly positive impact on App Store revenue
The spread of Coronavirus is bad news. But one particularly bullish analyst from Morgan Stanley thinks there’s an upside. At least, as far as Apple’s bottom line goes.
In a note to clients, Morgan Stanley analyst Katy Huberty suggests that the spread of Coronavirus in China will give people more time to buy apps from the App Store.
“We believe the App Store could possibly experience a tailwind from the actions taken to limit the spread of Coronavirus,” Huberty writes. The reason for this tailwind would be the fact that, “millions of Chinese consumers are spending more time at home and seeking alternative means of entertainment.”
That might sound unlikely, but Huberty has some evidence to back it up. Tencent, for instance, has announced that it is expanding server capacity for gamers playing Game for Peace. This is after a large number of players overwhelmed servers during the (largely cancelled) Chinese New Year festivities.
She also points to App Store data showing that net revenue grew 22.5% year-over-year in the month of January.
Morgan Stanley currently has an Overweight rating on Apple and a price target of $368. The stock closed Wednesday trading at $321.97.
Will Coronavirus help the App Store?
History does actually back up Huberty’s prediction — at least as far as online purchases go. Online retailers such as Alibaba have done very well in similar situations in the past, such as the SARS coronavirus epidemic in the early 2000s.
The issue for Apple is that it isn’t solely an online retailer. Over the weekend, Apple announced that it is closing 42 of its Apple Stores in China through February 9 due to Coronavirus. There is also concern for what the spread of the virus will mean for manufacturing. Apple is far from the only company whose factories are being affected by Coronavirus. However, Apple’s volumes mean that many suppliers already work flat-out to meet demand.
Other analysts aren’t panicking about Coronavirus. Wedbush analyst Dan Ives, one of the most bullish Apple analysts on the planet, remains confident. But much of the confidence expressed involves Coronavirus being only a temporary disruption. As far as I’m aware, not too many think this could be a reason to expect a spike in Apple’s business.
Source: Street Insider