Apple’s reliance on the iPhone is a key factor in its future revenue growth, according to Needham analyst Laura Martin. Martin maintains her ‘buy’ rating on Apple with a $260 price target, based on a Discounted Cash Flow (DCF) model. Her projections suggest that Apple’s upselling efforts, including wearables, accessories, iPads, Macs, and the new Vision Pro headset, will contribute around $97 billion in revenue by fiscal 2025.
However, a significant portion of this revenue remains tied to the iPhone. Martin estimates that an additional 50% to 80% of the $97 billion in upselling revenue is dependent on iPhone sales, implying an incremental 12% to 19% revenue boost. In total, this means that a staggering 89% to 96% of Apple’s fiscal 2025 revenue is projected to be reliant on the iPhone. This highlights the iPhone’s crucial role as the anchor product in Apple’s ecosystem.
While Apple is growing its revenue from services, which currently accounts for 26% of total revenue, Martin points out that 100% of this revenue depends on owning an iPhone. In essence, the iPhone remains the backbone for a large chunk of Apple’s overall revenue stream.
Despite investor concerns about Apple’s high valuation, Martin remains bullish. She believes that Apple’s large installed base of 1.25 billion wealthy consumers using 2.2 billion active devices, combined with its focus on increasing user lifetime value through upselling, will drive continued growth. Apple’s strategy involves expanding its product and service offerings to create stickiness and lock users into its ecosystem.
Apple is also actively repurchasing shares and aims to achieve a ‘net cash zero’ position by fiscal 2025, which implies significant share buybacks going forward. The analyst emphasizes that Apple’s installed base is a key factor in its valuation and pricing power, considering the average user spends approximately five hours a day on their Apple devices.
While Apple continues to invest in large language models (LLMs) and other generative AI infrastructure, Martin cautions that there is no visible revenue upside yet. This highlights the potential for future growth beyond the iPhone, but emphasizes the current reliance on Apple’s flagship product.
Despite the reliance on the iPhone, Apple’s revenue grew 2% in fiscal 2024 after a 3% decline in fiscal 2023. Martin attributes this re-rating to investors seeking a safer, liquid stock in 2025. Despite its dependence on a single product, Apple remains a major player in the tech industry and continues to attract investor attention.
