Bernstein Explains How Apple Could Produce $10B In Incremental Revenue

Bernstein analyst Toni Sacconaghi acknowledged that Apple Inc AAPL had quietly built a small but growing ad business.
However, Sacconaghi estimated that Apple's ad revenue was well under 2% of its overall revenue.
Most of Apple's ad revenue came from the App Store ads, with modest revenue from display ads in its Apple News and Stocks apps.
Apple's revenue from the Google deal and direct sale of ads account for 30% of Apple's services revenue and more than 40% of gross profits from the services business.
Sacconaghi thinks Apple could generate $10 billion in incremental revenue by selling ads on iOS apps, something that Alphabet did via Android.
As Apple expanded its services offerings, it could procure more information about users, which allowed it to target advertising more effectively.
Apple's strategy could further hurt Meta Platforms Inc FB, which already suffered from Apple's privacy settings.
Sacconaghi had a Market Perform rating on Apple with a price target of $170 (2.8% upside).
Price Action: AAPL shares traded higher by 0.11% at $165.65 on the last check Tuesday.