Investment bank JPMorgan on Friday suggested that advertising could be Apple‘s (AAPL) next major services business. The speculation comes as Apple stock is in record high territory.
JPMorgan analyst Samik Chatterjee reiterated his overweight rating on Apple stock and raised his price target to 290 from 280.
Apple stock climbed 1.2% to 265.76 on the stock market today. In intraday trading Friday, Apple stock notched a record high of 265.77.
On Sept. 11, Apple stock broke out of a first-stage flat base at a buy point of 221.47, according to IBD MarketSmith charts. On Sept. 10, Apple introduced its iPhone 11 series smartphones, as well as Apple Watch Series 5 and new iPads. It also detailed its Apple TV+ and Apple Arcade services.
Advertising Business Underappreciated By Investors
After the recent launches of Apple Arcade and Apple TV+, investors are wondering what the next big services business could be for Apple, Chatterjee said in a note to clients.
“Hidden in plain sight and underappreciated by most is the advertising opportunity within Apple’s fingertips, given the secular migration of advertising dollars to mobile platforms, the large installed base of close to 1 billion iPhone users, and importantly, Apple’s successful exploration of advertising to date,” he said.
If Apple were to accelerate monetization of advertising, it could generate $11 billion in ad sales in fiscal 2025, Chatterjee said. That compares to an estimated $2 billion today, he said.
Apple currently generates ad revenue from Apple Search Ads in its App Store. But it has restricted itself to one advertisement or suggestion per search.
“Apple can amplify its revenue from Apple Search Ads by adopting additional advertisements per search,” he said. “We forecast revenues expanding from $2 billion to $9 billion by 2025.”
Apple also could add advertising to its Apple TV video platform, Chatterjee said.
“There is an opportunity for Apple to monetize advertising opportunities on Apple TV through suggestions and targeting of demographics for content distribution in a manner similar to Roku (ROKU),” he said. “We estimate a revenue opportunity of $2 billion in fiscal 2025.”
Apple Stock Gets More Price-Target Hikes
Two other Wall Street firms raised their price targets on Apple stock on Friday.
Piper Jaffray analyst Michael Olson reiterated his overweight rating on Apple stock and upped his price target to 290 from 270.
Wedbush analyst Daniel Ives kept his outperform rating and increased his price target to 325 from 300.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor companies.
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