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Key Takeaways
- Apple shares gained Wednesday after Needham analysts lifted their price target for the stock.
- The analysts noted the iPhone maker is adding value for shareholders through its $110 billion share buyback, while other tech giants are raising spending on artificial intelligence initiatives.
- Advertising could also represent a major growth opportunity for Apple, the analysts said.
- They suggested running ads on Apple TV+ and the App Store could drive revenue growth and higher margins for Apple.
Apple (AAPL) shares rose Wednesday as Needham analysts raised their price target for the stock, contrasting the company’s share buyback program with competitors’ increased spending and highlighting the iPhone maker’s potential to gain from selling ads on Apple TV+, the App Store, and more.
Needham analysts lifted their price target for the stock to $260 from $220. Shares of Apple finished close to 2% higher at $232.98 Wednesday, contributing to the stock’s gain of about 21% since the start of the year.
Apple Adds Shareholder Value With $110 Billion Buyback as Peers Raise Spending on AI
In raising their price target for Apple stock, Needham analysts cited how the iPhone maker is adding value for investors through its $110 billion share buyback program, which set a record as the largest stock buyback program in recent history, beating the previous record also held by Apple.
They noted the buyback comes as many other tech giants are increasing capital expenditures to invest in artificial intelligence (AI), raising concerns about AI’s costs. Big tech companies, including Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (META), and Amazon (AMZN), are set to spend more than $1 trillion on AI in the next five years, according to Goldman Sachs.
Selling More Ads Could Unlock New Growth for Apple
Needham analysts also suggested advertising could represent a major growth opportunity for Apple, pointing to Amazon’s (AMZN) multibillion-dollar advertising business.
Selling ads on AppleTV+ alone could double Apple’s revenue growth rate in fiscal 2024, they said. Bringing ads to Apple’s App Store could accelerate growth further.
The analysts said they “can’t think of another revenue stream that AAPL could pursue that is larger and more profitable” than advertising would be, especially given the high margin rates associated with ads.