Mike Peterson
Investment bank Cowen believes Apple News+ is a key pillar in growing Apple Services, and forecasts that it could reach 19 million paid subscribers by 2023.
In a note to investors seen by AppleInsider, lead Cowen analyst Krish Sankar predicts that Apple News+ could grow to $2.2 billion in revenue by 2023, a compound annual growth rate (CAGR) of 31%.
"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," Sankar wrote.
He believes Apple News+ could be bolstered by both improving advertising platforms and a shift away from the Identifier for Advertisers tracking tag used on mobile devices after the release of App Tracking Transparency. The privacy feature, Sankar adds, could be a "disruptive event" that levels the playing field for ad networks in the iOS ecosystem.
The analyst adds that Apple's advertising endeavors could be on an encouraging trajectory because of the maturation of Apple Search Ads (ASA) on the App Store. Apple leveraging ASA and the recent changes to IDFA could accelerate ad revenue from Apple News in the coming years.
Cowen is currently modeling 36% Apple News ad revenue growth over the next three years, up from 30% in the prior three years.
"While we expect Apple to remain a small player in the overall digital ads market, we think there is opportunity to further monetize ASA across other portions of the Services portfolio longer-term," Sankar writes.
Sankar believes Apple News+ had about 11 million paid subscribers in 2020, generating revenue of about $550 million. Going forward, he believes that Apple News+ could reach 19 million subscribers by 2023. That could rake in $1.14 billion in subscription revenue and $1.02 billion in digital ad revenue from ad impressions, resulting in a total of $2.2 billion.
The analyst also believes Apple News+ could be a boon to the newspaper industry amid declining readership, concerns around misinformation, and plunging ad revenue.
He cites the mix of human-curated news content, sales diversification from subscriptions, improving ad platform tools, and a growing readership base with "high purchase intent" as reasons why Apple News could be an attractive return-on-investment for content and ad campaigns.
Sankar maintains his Outperform rating and $153 AAPL price target, based on a sum-of-the-parts analysis by applying a 27x earnings multiple on Apple's core business and a 46x multiple on Services. That leads to a blended 35x price-to-earnings (P/E) multiple on Cowen's 2021 earnings-per-share estimate of $4.35.
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13 Comments
Please, finally bring Apple News to Austria!
Sadly, it’s available in only 4 countries: Australia, Canada, the United Kingdom and the United States. It’ll take a bigger base to grow it by any significant degree. It’s hard to understand what legal/copyright issues might be holding back a broader rollout (Apple TV + was available in over 100 countries from day one). German, Spanish, French, Russian, Mandarin and Hindi versions of Apple News would transform the service!
I cancelled because even if i blocked sports, entertainment, fashion and celebs, that crap kept appearing in my feed. Not happy.....
I love Apple News! Its become my go to app for whenever I have 5 mins to kill waiting in a line somewhere or I'm just bored. I suppose I'm something of a news junkie so Apple News has become a very reliable dealer. True, the feed preferences don't always give you exactly what you specified but that should evolve over time. I'm always able to find something of interest for a quick hit of reading even as a non-paying customer.
I would gladly pay but see no reason to while there are still so many free ways to get news. It seems like a no-brainer to offer this kind of news aggregator service and I wonder why Facebook has such a hard time doing it. I don't think Apple is going through a lot of trouble with Russian/Chinese propaganda articles sneaking in. Their model seems to rely on letting the sources do that for them. So you kind of know what you're getting for when you see an article from someplace like the Wall Street Journal versus something off Buzzfeed or Page Six of New York Post. In my mind this is a much better way of handling it, because you know what political view a news article is going to have if its sourced from Fox News versus one off Politico or Huffington Post.
I hope Apple News continues to grow and more news outlets join in! It can only get better and its nice to be able to bookmark things or follow up on articles when I get home. Great service!