Forget Amazon and Google. Apple could bring in $300 billion a year in healthcare, Morgan Stanley says (AAPL)

tim cook

Apple has been getting into healthcare for years, from the iPhone to the Apple Watch and more.
Investors are too focused on healthcare efforts from other tech companies like Amazon and aren't taking Apple's opportunity seriously enough, a new Morgan Stanley report says.
The tech giant could build an App Store-like model for healthcare, potentially bringing in $15 billion to $313 billion in revenue by 2027, Morgan Stanley estimates. Read on to find out how.
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Apple has been edging its way into healthcare for years. Morgan Stanley says investors aren't taking the move seriously enough.

Healthcare is a market where the tech titan can lead digital disruption, "armed with the Apple Watch and the iPhone," Morgan Stanley said in a recent report.

The healthcare industry could become an important driver of growth as smartphone demand plateaus, potentially bringing in anywhere from $15 billion to $313 billion in annual revenue for Apple by 2027, according to the report.

"Healthcare is both large — $3.5 trillion addressable US market — and nascent in its digital transformation," the analysts said.

"So, unlike recent announcements on news, gaming, video, and payments, where Apple is joining existing competitors, healthcare is a market where Apple has the potential to lead digital disruption — much like what iTunes did for music or the App Store for mobile services."

Investors aren't giving Apple much credit for its healthcare potential. When Morgan Stanley surveyed 30 investors and leading health and tech executives about tech companies' potential in the space, Apple got the least attention, according to the report.

But Apple's enormous user base, with 900 million iPhones and 23 million Apple Watches, can only be an advantage, the Morgan Stanley analysts said.

The team also sees a clear strategy underpinning Apple's recent moves in healthcare.

The company is building out "another ecosystem like the App Store," focused on tracking and accessing health data and information, the analysts said.

Read: Tim Cook says that improving people's health will be 'Apple's greatest contribution to mankind'

Connecting the dots on Apple's approach to healthcare

Apple has become iconic for its ability to create tech platforms where none existed, like the App Store, and iTunes for music.

But as anyone who has ever tried to get their lab-test records knows, the health industry has never been particularly easy for the average person to navigate.

Apple could change that. The tech giant already has the raw material in place to build the App Store of healthcare, Morgan Stanley argued.

That includes, for example, the Health app on every iPhone, software that medical researchers can use to conduct studies, and the Apple Watch, with its heart-health capabilities.

The company is also expanding into storing health records like prescriptions and lab results on the iPhone.

As part of those initiatives, the tech giant has partnerships with medical institutions, health insurance companies, and even the drugmaker Johnson & Johnson.

Morgan Stanley on Apple in healthcare

Why health could be a $300 billion revenue opportunity by 2027

Apple's healthcare play could put eye-popping revenue at stake: as much as $313 billion in annual revenue by 2027, per Morgan Stanley. The analysts based their calculation on estimates of how much waste there is in the US healthcare system and how much Apple might be able to reduce that waste.

Even a smaller figure of about $90 billion — in the middle of what the analysts see as the broad range of Apple's revenue opportunity — translates to about 35% of Apple's current revenue, the analysts said.

Apple's best shot at earning that amount is in wearables, they said, which could mean expanding into products that measure temperature, blood pressure, or glucose levels in the blood.

Announcements of that kind, for either the Apple Watch or medical-grade wearables, could ignite investor interest, the Morgan Stanley report said.

Selling health-data storage on iCloud to people is also promising, and so is selling data and tools to hospitals and doctors to make their processes more efficient.

Investors might also focus on Apple and healthcare if Apple got involved in something like the JPMorgan-Amazon-Berkshire Hathaway initiative, if the Apple Watch became covered by health insurance, or if Apple acquired a healthcare company, the Morgan Stanley report said.

Apple faces rival tech titans in healthcare

Of course, Apple is hardly the only tech giant to see an opening in healthcare.

Other large tech companies like Amazon and Google have signaled their interest, with Amazon's entry especially attracting attention.

The e-commerce giant acquired the digital pharmacy PillPack last year and recently added health skills like the ability to schedule doctor's appointments to its voice assistant, Alexa.

"It's still early days for Amazon's healthcare initiatives," the analysts wrote.

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