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Apple stock is sliding in a rough market for technology shares, as investors continue to take profits after the iPhone maker’s stronger-than-expected March quarter earnings report.

At least on the surface, the nearly 5% drop in Apple (ticker: AAPL) stock since the company reported financial results last week seems puzzling. For the quarter, Apple posted $89.6 billion in revenue, $12 billion ahead of what the Street had expected, while profits were $1.40 a share, soaring past the consensus estimate for 98 cents. Revenue was up 66% for iPhones, 70% for Macs, 79% for iPads, 25% for wearables, and 27% for Services, all above forecasts.

But as we’ve previously noted, some analysts expect last year’s Covid-19-boosted results to create some very difficult comparisons for Apple—some observers worry that revenue for the fiscal year ending in September 2022 could slip from fiscal 2021. In short, there are concerns that Apple and other tech businesses that thrived in the pandemic face very difficult comparisons in coming quarters. And on Tuesday, there was a small hint of how that could affect Apple.

Several analysts observed that new data from Sensor Tower, a firm that tracks app-sales activity, showed that Apple’s App Store net revenue in April was up 16% year-over-year, down from 24% growth in March. Morgan Stanley analyst Katy Huberty responded to that news by trimming her forecast for June quarter services growth to 25% from 28%, with just 11% growth in App Store revenue for the quarter.

“While our bullish outlook on the long-term opportunity for improving App Store monetization is unchanged, we are now incorporating a slightly lower App Store net revenue growth rate in the near-term to account for softer-than-expected April 2021 App Store net revenue growth,” Huberty writes. “While we had expected a growth slowdown given the more difficult year-over-year compare in April relative to March, App Store net revenue slowed faster than we had expected.” The analyst keeps her Overweight rating on Apple stock and $161 target price.

Evercore ISI analyst Amit Daryanani also picked up on the new Sensor Tower data, noting that App Store growth slowed after six straight quarters of growth above 30%. He finds that the primary issue is a slowdown in gaming revenue as we lap the early 2020 Covid shutdowns.

“The App Store is facing difficult comps after reporting 33% growth in the June 2020 quarter,” Daryanani notes. “ Apple Care is another component of the services business that will likely slow down, as it tends to be relatively correlated to iPhone sales.” The analyst nonetheless keeps his Outperform rating and $175 target.

Apple stock on Tuesday are down 3.8%, to $127.49.

Write to Eric J. Savitz at eric.savitz@barrons.com

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