Bernstein Explains How Apple Could Produce $10B In Incremental Revenue

Bernstein Explains How Apple Could Produce $10B In Incremental Revenue
  • Bernstein analyst Toni Sacconaghi acknowledged that Apple Inc AAPL had quietly built a small but growing ad business.
  • However, Sacconaghi estimated that Apple's ad revenue was well under 2% of its overall revenue.
  • Most of Apple's ad revenue came from the App Store ads, with modest revenue from display ads in its Apple News and Stocks apps. 
  • Apple's revenue from the Google deal and direct sale of ads account for 30% of Apple's services revenue and more than 40% of gross profits from the services business.
  • Sacconaghi thinks Apple could generate $10 billion in incremental revenue by selling ads on iOS apps, something that Alphabet did via Android.
  • As Apple expanded its services offerings, it could procure more information about users, which allowed it to target advertising more effectively. 
  • Apple's strategy could further hurt Meta Platforms Inc FBwhich already suffered from Apple's privacy settings.
  • Sacconaghi had a Market Perform rating on Apple with a price target of $170 (2.8% upside).
  • Price Action: AAPL shares traded higher by 0.11% at $165.65 on the last check Tuesday.
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