By Sam Boughedda
If Apple (NASDAQ:AAPL) were to monetize advertising beyond the App Store, it could potentially be a $20bn business by 2026, according to BofA analyst Wamsi Mohan.
Mohan said in a research note Thursday that advertising could be the "next driver" for Apple's services growth.
"Apple’s competitive advantage remains its large and captive installed base. Apple’s 1.8 billion installed devices lend themselves naturally to be conduits for advertisers to reach a large demographic. We estimate that if Apple were to monetize advertising beyond the App Store, it could potentially be a $20bn business by 2026, driving up the pace of Services growth back to the high teens vs. concerns of a permanent slowdown," wrote the analyst.
The analyst added that Apple "generates advertising revenue from search ads on the App Store (we est. $5.3bn rev from such ads in F22, growing to $9.8bn in F24)." However, they believe the company can generate advertising revenue by creating an ad management platform that could allow other mobile apps on the iOS platform to sell ads on their Apps, enabling local ads on the Apple Maps App, allowing other apps to integrate Apple Maps via an application programming interface (API), and launching an ad-supported version of Apple TV+.
"We est. such new advertising avenues can generate $10-12bn of revenue by 2026," added Mohan, who maintained a Buy rating and $200 per share price target on the stock based on "upcoming product cycles, long-term growth in Services, opportunity to monetize the installed base, & strong capital returns."