Cowen: Apple News biz on an ‘encouraging trajectory’

Analyst Krish Sankar sees News+ revenue growing from $0.5 billion in 2020 to $2.2 billion in 2023.

From a note to clients that landed on my desktop Tuesday:

Apple’s News+ product is a key pillar in growing subscription services, and we forecast the overall News platform can grow from $1.0B revs in FY20 to reach $2.2B by FY23 (31% CAGR) with 19M paid subs and share gains in advertising. We believe upcoming IDFA / pro- privacy changes in iOS can help accelerate Apple’s ad network sales growth to a 36% CAGR.

News+ Position within the Publishing Industry is Modest, but Accelerating We believe Apple’s News app and the News+ paid subscription service (News platform) are well positioned to not only benefit from incremental subscriber additions but also accelerating advertising revenue growth from an improving advertising platform and potential share gains from its pro-privacy stance. We think the adtech industry’s transition away from the IDFA for mobile devices could be a disruptive event by leveling the playing field for ad networks within the iOS ecosystem. We estimate News platform revs can reach $1.6B in FY21 and contributing EPS of ~$0.04 (2% of Services profits).

Apple News Platform to reach $2.2B revs by FY23 Launching just over 2 years ago, News+ is the subscription service for the News app (free news content aggregator) that Apple offers in Australia, Canada, the UK, and US. We estimate News+ had ~11M paid subscribers in FY20 generating revs of $550M based on the $9.99/mo service fee. As end users consume more news and media content digitally, our model assumes News+ can add 2-4M paid subs / year reaching 19M by FY23, and representing $1.14B in subscription revs. We anticipate the News platform can reach $2.2B in total revs by FY23 when including $1.02B of digital ad revs (47% of News platform total) from ad impressions served alongside publisher content.

Maintains Outperform rating and $153 price target. 

My take: It’s good to be the default app.

7 Comments

  1. Gregg Thurman said:
    At what point do the regulators begin to think of Apple’s many business units as a whole, and not individually, in calculating monopoly dominance?

    3
    April 6, 2021
    • Fred Stein said:
      Funny. I’ve wondered about this too. The items regulators/legislators flame out about like the App Store, or music are ludicrous. Apple is a bit player in music, entertainment, gaming, etc.

      But Apple and TSMC are like a duopoly. And Apple pretty much owns the mobile SmartPhone experience for the top half of the US population and the top 20% of the world’s.

      3
      April 6, 2021
    • Robert Paul Leitao said:
      Gregg: What monopoly? On an annual revenue basis, Apple is #7 in the world among publicly-owned enterprises and the six larger enterprises aren’t facing monopoly inquiries. Compared to #1 on the list (Walmart), Apple is about half its size. Add in government-owned enterprises and Apple falls to #11 on the 2020 list. If revenue is a primary factor in determining what is a monopoly, I’d like to see regulators pull Toyota (#6 on the list) into hearings with a straight face.

      3
      April 6, 2021
  2. Jerry Doyle said:
    Apple is a long ways from attracting federal regulators’ attention as a business monopoly. Which business?

    Apple still has a number of new growth areas to consider. Let us hope the next business growth area will be in the automobile industry. Then Apple can move into establishing its own car financing, its own car insurance company and a supporting Apple Care Protection Plan for the iCar.

    There are Apple battery Golf carts, Apple battery motorcycles and hopefully Apple will move to rid the country of other ICEs, even competing with John Deere, Kubota and others. Talk about high tech agricultural hardware, software and services combined for higher crop yields!

    Apple still has multiple opportunities in the financial industry beyond the Apple card payment system by branching out into the Apple banking and investment brokerage industry.

    Continue….

    0
    April 6, 2021
  3. Jerry Doyle said:
    Continued….

    With Apple’s emphasis on Health & Wellness there is sufficient clientele attracted to subscribing to Apple’s Health & Wellness Insurance. Apple is in a propitious position to provide Apple Watches to all new insured Apple consumers for health maintenance, monitoring and premium quality health care. (I say goodbye BC/BS).

    With its emphasis on reduction of carbon emissions Apple should strive to become the leader in providing solar panels for every home built in future generations. The housing industry is huge. We know Apple desires a major home presence using its technology prowess to give the Apple consumer a Garden of Zen like experience while moving from the Apple home to the Apple Car.

    We haven’t even discuss Apple’s educational learning centers scattered across the globe.

    Yes, it all is somewhat of a good-humored spoof, but it also has practicality behind it, and a need I may add. Even if Apple spread it wings to that level described above it still would fall short of a business monopoly.

    2
    April 6, 2021
  4. Steven Philips said:
    I want some of what Jerry’s been smoking! 🙂
    (And the stock price if Apple actually did all that stuff!)
    But hurry up! I’m getting old.

    4
    April 6, 2021

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