Needham acknowledges Apple's current focus on buybacks comes "at a time when other big tech companies are spending $50-$100B on GenAI infrastructure." However, they express concern about Apple's long-term revenue growth, stating, "AAPL's single-digit rev growth rate feels increasingly at risk to us" over a 3-year time frame.
Needham believes Apple should enter the advertising market, similar to Amazon (NASDAQ:). The investment firm argues, "Advertising is global and, at $966B total and $500B on mobile (eMarketer) in 2024, both are larger than AAPL's FY24E revs of."
They believe advertising's high margins "would drive margin expansion at AAPL without raising device prices." The analysts calculate that "selling CTV ads on AppleTV+ alone would add 140 b.p. to rev growth, thereby doubling AAPL's consensus rev growth of just 1% in FY24."
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