Consumers are shopping at Apple’s App Store more than ever.
Billings at Apple’s 6-year-old store rose 50% last year, to a whopping $15 billion. That’s up from more than $10 billion in 2013. Sales remain strong in so far in 2015. During the first week in January, users spend almost $500 million dollars on apps, according to the company. The App store had it’s biggest day in sales every on New Year’s Day.
Rumors that consumers had "app-fatigue" appear to be just that-- rumors.
According to the Wall Street Journal, Apple keeps 30 cents of every dollar it brings in through its App Store. “It’s becoming a really big business for Apple [and] for all the folks who build apps,” says Yahoo Finance’s Henry Blodget. But, he says, “It’s not big enough to carry Apple’s profitability from here.” Blodget points out that Apple’s profitability is still very much tied to the sale of iPhones.
Apple’s latest numbers show it brings in $183 billion in annual sales; analysts estimate that Apple’s revenue grew 10% in 2014. That’s according to CapitalIQ. The majority of Apple (AAPL) sales are generated through hardware, so the app sales are just a tiny drop in the bucket.
However, because of higher margins, the App Store-- as well as the iTunes store-- is much more profitable. Blodget says, “It’s growing faster than everything else with the exception of this one quarter burst from the iPhone.” But, he points out, the idea that “It’s going to suddenly offset hardware so it doesn’t matter what happens to hardware prizes? That’s crazy.” In other words, Apple remains “the iPhone company.”
Shares of Apple had a huge run on the iPhone 6 last year, despite hitting some volatility recently. Blodget, who owns Apple stock, says the question investors should be asking is, "What happens next?"
“There is some excitement about the watch, there’s excitement about ApplePay, there’s excitement about Apps. There is ‘stuff’ to talk about,” says Blodget, “But really what people need to think about is ‘Okay, iPhone 6s—what does it look like? Is it enough to drive another big cycle? iPhone 7—is there more innovation there?”
Blodget isn't so sure. “I have to say I think we’re pretty much done on the smartphones from a hardware basis," he says. "I am concerned. I still have my stock, but I am probably not going to be extra long Apple.”
More from Yahoo Finance