The Apple (AAPL) empire might be led by its flagship iPhone, but along with many other hardware offerings, its Services segment has grown rapidly. There’s also talk of a “game-changing” AV/VR headset and even an Apple Car at some point.
But Needham analyst Laura Martin thinks there is also the prospect of another big revenue stream.
“We believe AAPL is in the early stages of building a new mobile advertising platform,” says Martin, who believes ad revenue could be an “upside value driver” for the advertising giant. technology for several reasons.
On the one hand, there is the offensive element. Apple being the largest company in the world, to continue growing it needs to focus on the large global TAMs (Total Addressable Markets). As eMarketer expects the global digital advertising market to reach $600 billion this year, it certainly is.
There’s also a defensive element, as Martin explains: “Creating a privacy-focused ad platform would solve a problem for AAPL’s ad apps that saw their ad revenue plummet after iOS replaced IDFA by ATT in 3Q21.”
It also equates to smart tactical movement. Apple operates like a “Walled Garden” and its user data is “best in class”. At the same time, it also reduces the tracking and transparency data available to other businesses. This gives a boost to the company’s pricing power.
Martin does not just speculate on the matter. There is evidence of Apple’s advertising ambitions, as the company’s recent job postings imply that a new AdTech platform is being built. Since the first months of the year, there has been a notable increase in the company’s recruitment activity for its Ad Platform unit. Just recently, Apple opened a job opening for “a senior executive for its DSP in its ad platforms business who will drive the design of the most sophisticated and privacy-friendly demand-side platform possible. “. Additionally, Apple made its presence felt during the Cannes Lions advertising festival in June. This suggests to Martin that the company is trying to “make marketers aware that it’s part of the advertising business.”
So, down to the nitty-gritty, what does all of this mean for investors? Martin reiterated a buy rating on Apple shares, backed by a price target of $170, suggesting the stock is currently fairly valued. (To see Martin’s track record, Click here)
The average street target is a bit higher; at $180.11, the figure leaves room for a 9% upside from current levels. In total, based on 22 buys, 6 takes and 1 sell, the stock claims a moderate buy consensus rating. (See Apple stock forecast on TipRanks)
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Disclaimer: Opinions expressed in this article are solely those of the featured analyst. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.