Apple slips as Needham cuts 2023 estimates but firm highlights potential ad boost
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Apple (NASDAQ:AAPL) shares slipped fractionally in premarket trading on Thursday as investment firm Needham cut its revenue and earnings estimates for 2023, citing "weak iPhone demand" in China, while highlighting a new potential platform that could boost its advertising revenue.
Analyst Laura Martin, who has a buy rating and $171 price target on Apple (AAPL), now expects 2% revenue growth to $403.1B and $6.07 per share in earnings, down from 2% and 4% from previous estimates, citing not only concerns about the iPhone in China, but the weakening global economy, supply-chain shortages and growing geopolitical pressures between the U.S. and China.
Martin also lowered her first-quarter estimates for Apple (AAPL) as well, citing the same reasons.
While Martin raised concerns about Apple's (AAPL) iPhone business, she also noted that advertising revenue could increasingly become a bigger part of the tech giant's Services revenue, namely from connected TV.
Martin posited that a new advertising tier for Apple TV+could help the company's fundamentals, citing the fact that mobile advertising is a $400B per year industry and total digital advertising is worth some $650B.
"[Apple] is putting high-quality content on its [over-the-top] service ... that no one is watching because its price/month is too high (after its free promotion period ends)," Martin wrote in a note to clients. "Adding an ad-driven tier is an easy way to lower the [average] monthly price for [Apple TV+]."
Martin noted that Amazon (AMZN) was able to build a successful $30B per year advertising business in 5 years, suggesting Apple (AAPL) may do the same. 
Earlier this week, it was reported that Apple (AAPL) was in the process of moving some of its MacBook production out of China and over to Vietnam.