JP Morgan Sees Strength for iPhone and Growth for Apple Advertising
16 JUNE 2022 - JP Morgan analyst Samik Chatterjee is on a tear this week. Before Wednesday he had published notes on Apple Music, Apple Arcade, and Apple Fitness+. Now, Apple Insider has notes on two more notes from Chat-Man - one covering today’s iPhones and another looking at the future of Apple’s advertising business.
Chatterjee Sees Strength for iPhone in the States
On the phone, the iPhone 13 line is still crushing it in his estimation. He’s got new numbers from Wave7 Research showing both the consumer and Pro sides of the 13 line selling better than their predecessors here in the states. According to the report:
The iPhone's share of the market ranked at 66% for AT&T, 60% at Verizon, and 57% at T-Mobile, respectively. That's better than in previous years, which implies a structurally higher market share for Apple's devices.
And, at least anecdotally, they’re driving switchers in droves. The piece indicates at least “73% of carrier representatives said that Apple was getting the most switchers, while only 16% said the same about Samsung.
At the same time, there were numbers to make one wonder whether folks selling smartphones actually get the whole platform thing. Switching means switching to iOS. And yet, while “73% of carrier representatives said that Apple was getting the most switchers,” Apple Insider says:
When it came to operating system switchers, 43% of representatives said they were seeing more switching happen from Android to iOS, while 51% said the overall rate of switching between the two operating systems was "about even." Only 5% said that more switchers were choosing Android over iOS.
JP Morgan Weighs Apple’s Advertising Future
For most of the week, Mr. Chatterjee has been hitting various Apple Services. Mid-week, it was advertising’s turn at the plate. He thinks Apple could make as much as $6 billion in advertising by 2025, though that might be a tough needle to thread. According to his note:
[JP Morgan forecasts] revenues amounting to $1.7 bn by FY25, if Apple were to be willing to build an audience network of third-party applications which allow Apple to manage the logistics of ad targeting and delivering to these applications, matching demand from digital advertising customers with supply of an audience…
Could Apple do that? Technically - sure. There are a couple of potential pitfalls around it though. First, there’s the court of public opinion: Users might be upset with Apple making a huge amount of money selling them to advertisers when Apple’s built a reputation on protecting them from advertisers. That said, it’s likely the public won’t notice. A bigger concern may be Johnny Law. Or, Johann Law. We heard just this week of an investigation by antitrust regulators in Germany over Apple’s implementation of App Tracking Transparency and whether it was “designed to give Apple an unfair advantage in advertising.” The ever watchful eye of regulators may stunt such a move.
Well, that just leaves $4.1 billion that’s practically guaranteed. According to Apple Insider:
…the largest share of advertising revenue for Apple will still come from Apple Search Ads. By 2025, Chatterjee believes the ad type will reach $4.1 billion in revenue. That number is actually limited by what he says is Apple prioritizing “consumer experience,” which likely amounts the company's focus on privacy and design.
Mr. Chatterjee has a positive rating on Apple shares. His price target on the shares is $200.
