Apple (NASDAQ:AAPL), a major player in the tech industry, has come under fire for its lack of groundbreaking products in recent years. The introduction of the Apple Vision Pro, the company’s debut virtual reality headset, has raised hopes for a potential turnaround, garnering anticipation similar to the AirPods launch.
Set for release in the U.S. on February 2, the Apple Vision Pro’s international launch date is yet to be revealed. Despite the promising prospects, my stance on AAPL stock remains neutral.
Beyond Encouraging Demand Trends
The pre-order of the Apple Vision Pro commenced on January 19, with the 256 GB version priced at $3,499. Comparatively, Meta Platforms, Inc.’s (NASDAQ:META) latest VR offering, Oculus Quest 3, starts at $499 for the 128 GB variant. Despite apprehensions surrounding the Vision Pro’s steep price, initial data from the pre-order weekend indicates robust demand.
Renowned Apple analyst Ming-Chi Kuo estimated sales of 160,000 to 180,000 Vision Pro units during the first pre-order weekend, signaling a swift sell-out. However, unlike iPhones that experience a gradual rise in shipping times post pre-order availability, the Vision Pro’s shipping times remained constant for the initial 48 hours. This atypical trend poses a cautionary signal according to analyst Ming-Chi Kuo, suggesting a lack of appeal to the broader tech consumer base.
Apple’s strong fan base typically drives purchases of new devices. However, the waning demand for the Vision Pro beyond the initial burst reveals a struggle to resonate with mainstream tech consumers.
The AR/VR Market: Awaiting Disruption
Despite not being an early entrant in key consumer tech segments, Apple has excelled in capturing market share by understanding consumer preferences. Presently, the AR/VR headset market is nascent, with IDC projecting 8.1 million device shipments in 2023. Meta held sway in this market in Q3 2023, commanding 49% of all device shipments, with a 29% year-over-year dip attributed to the lack of compelling launches.
The relatively modest scope of the AR/VR headset market presents significant potential for disruption, an area where Apple has historically thrived.
Apple’s Scale Predicament
Apple’s exponential growth post-launch of the first iPhone in 2007 has made it challenging to meet Wall Street’s growth expectations. In Fiscal 2023, total revenue fell nearly 3% year-over-year to $383 billion, with net income also decreasing by 2.8%.
The company’s immense scale dictates the need for a highly successful product to significantly impact its financial performance. Despite an anticipated sale of 500,000 Vision Pro units in 2024, generating a minimum revenue of $1.75 billion, this figure pales in comparison to Apple’s projected $400 billion in 2024 revenue, illustrating the subdued influence of Vision Pro sales.
While Vision Pro may not meaningfully impact Apple’s fundamentals, it has the potential to enhance market sentiment and reaffirm the company’s status as a leading tech innovator if it surpasses Wall Street’s sales projections this year.
Assessing Apple Stock
Apple is closely monitored in the market, with Wall Street analysts expressing overall bullish sentiment. With 22 Buys, eight Holds, and one Sell within the last three months, the stock holds a Moderate Buy consensus rating. Notably, analysts from Bank of America Securities and Morgan Stanley have positively appraised Apple’s future prospects.
Although the Vision Pro may not substantially impact Apple’s earnings in the near term, the device could reap significant market rewards if it garners praise from tech enthusiasts and attracts bullish sentiment. Yet, at a forward P/E of 29 compared to its five-year average of 25, Apple seems pricier than the historical norm.