Apple Inc. doesn’t have to get flashy to cook up big new business opportunities, according to Evercore ISI analyst Amit Daryanani. Instead, the company can lean on its strong platform and financial position to incubate some sizable revenue drivers in a “capital-light” way.
He continued to view Apple’s stock AAPL,
Investors should hear a bit more about one of those Monday, when Apple executives take the stage for the keynote address at the WWDC developer conference, which is widely expected to bring the announcement of a mixed-reality headset — Apple’s first major new product launch in eight years.
That new device could be especially pricey at first, with reports indicating it could sell for about $3,000. Apple likely isn’t shooting for mass adoption right away, Daryanani wrote, and it might not get mass adoption over a slightly longer stretch either.
“While we think the learn and add incremental functionality approach will be similar to the Watch, we are still expecting the overall ramp to be much slower than the Watch given the high price,” Daryanani wrote. He estimated the company could sell more than 10 million headset units in the first five years, which would translate to the slowest ramp for a new Apple product this century.
Still, there’s a financial opportunity, as he estimated that the company could see annual revenue for the device rise to $10 billion by the fifth year of sales.
Other multi-billion-dollar opportunities involve areas that are more established for the company, including its advertising business. Daryanani saw room for Apple to grow revenue there from about $4 billion currently to upwards of $30 billion five years from now.
“The global advertising market is in excess of $1 trillion, so even a single-digit market share could be material,” he wrote. The company already generates ad revenue from the App Store’s search function, but it could tap new potential by leaning into maps and its television product, according to Daryanani.
Apple also could cash in further on its deepening involvement in the payments world.
“There are a lot of toll collectors in the payments space, so it is natural that Apple
can expand as their large user base gives them significant negotiating power,” Daryanani wrote. “Apple Pay is a great example of this as many payment companies were initially opposed to giving Apple a cut of interchange fees, but they ultimately did not have much of a choice as Apple users began to demand Apple Pay be more widely accepted.”
Even greater adoption of Apple Pay could propel the company’s payments business to about $14 billion in annual revenue come 2027, he estimated.
Beyond these newer opportunities, of course, is a chance for Apple to turn its big moneymaker even bigger.
“Picking up share in emerging markets (esp India) has been an upside driver in recent quarters,” Daryanani wrote of the iPhone business. Share gains in India alone ultimately could come to boost revenue by $20 billion. Overall iPhone sales amounted to $205 billion last fiscal year.