Amid growing concerns about iPhone 16 demand, Apple analyst Laura Martin from Needham reiterates her “Buy” rating and $260 price target on Apple stock, highlighting potential areas of growth for the tech giant.
Martin acknowledges the uncertainty surrounding the next iPhone replacement cycle, noting that it’s unclear whether it will be the iPhone 16, 17, or even 18 that drives a significant upgrade wave. While iPhone sales remain a substantial portion of Apple’s revenue, estimated at over 50% for fiscal 2024, representing a hefty $200 billion out of $390 billion, she emphasizes the need for alternative growth avenues.
One area Martin believes Apple should aggressively pursue is advertising revenue. She points out Apple’s slow adoption of advertising, even with its AppleTV+ streaming service, despite the platform’s potential for attracting a large, affluent audience. Martin suggests that Apple could charge similar advertising rates to Netflix, citing user metrics of 44.8 million viewers and a potential $5.5 million in advertising revenue for fiscal 2024.
This could significantly bolster Apple’s growth, adding 0.9% to 1.5% to its revenue growth rate, according to Martin. She believes that by following Amazon’s lead and building a robust advertising business, Apple could accelerate its revenue growth, expand profit margins, and ultimately achieve valuation multiple expansion over the next five years.
Martin also addresses other investor concerns surrounding Apple’s valuation, including the timing of the upgrade cycle, the impact of GenAI (Generative Artificial Intelligence), China’s economic influence, Apple’s reliance on iPhones, Vision Pro adoption, services revenue, health-related concerns, regulatory risks, and the company’s competitive landscape. She acknowledges the importance of these factors but highlights Apple’s strong ecosystem and loyal customer base as key strengths.
Apple’s stock has seen positive performance in 2024, with a 22% year-to-date gain and currently trading at $226.47. While the stock price performance is promising, Martin’s analysis underlines the need for Apple to explore new avenues for growth, particularly in advertising, to ensure continued success in the future.
