In a topsy-turvy market for tech stocks, Apple (AAPL) shares are down with the rest of the growth stocks this year (down ~27% since 2022 began).
However, according to J.P. Morgan analyst Samik Chatterjee, Apple is poised to outperform the market over the next 12 months — to not only regain its highs of earlier this year, but to surpass them, and rise as high as $200 a share — 54% more than Apple stock costs today.
Chatterjee laid out his thoughts on this score on Thursday, in a note on the subject of advertising spend and mobile ad growth at Apple. As the analyst writes: “Global advertisement spends are increasingly moving towards digital mediums, and mobile advertisement is expected to grow from $288 bn in 2021 to over $400 bn by 2024.” Not all this money will go to Apple, of course. But with an installed base of more than one billion iPhone users worldwide, and generally well-heeled, Western consumer-users residing in the United States and Europe to boot — the kind advertisers love to target — Chatterjee argues that Apple is “better positioned than most other companies to benefit from this secular trend” of mobile advertising growth.
Currently, explains Chatterjee, Apple’s advertising efforts are limited to selling no more than “one ad per search in the App Store.” But this is only the beginning of what’s available to Apple. There’s at least the potential, argues the analyst, for Apple to take advantage of its huge installed base of iPhones by targeting ads on its own applications, as well as third-party applications, and managing the delivery of these ads for its clients.
How big is this opportunity for Apple? It could be worth as much as $6 billion in incremental revenue by 2025, says the analyst, and once Apple starts down this road, Chatterjee believes the company could grow its advertising revenues “at a robust double-digit pace” in years past 2025.
Now consider those numbers for a moment: A $400 billion market opportunity — and Apple only claiming $6 billion of it — works out to a projection of a mere 1.5% of total global mobile advertising market share. This is not any kind of wild, far-fetched claim that Chatterjee is making. It’s actually both realistic and possibly even conservative, should Apple decide to capitalize upon its potential.
In the near term, Chatterjee continues to expect Apple to be content with mid-to-upper single digit revenue growth from now through 2024 (with earnings growing a bit faster than that — 8% to 10%). But over the longer term, Chatterjee believes that the likely growth in advertising revenue will help to support 10% overall long-term annual revenue growth at Apple — and presumably, even faster profits growth. (See AAPL stock forecast on TipRanks)
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Disclaimer: The 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.