Will Vision Pro Bring Bright Potential to Apple?

Will Vision Pro Bring Bright Potential to Apple?

Apple has grown by leaps and bounds since the first iPhone was launched in 2007. However, the company's massive scale has made it difficult for Apple to meet Wall Street's growth expectations in recent years. The launch of the Vision Pro virtual reality headset will help Apple maintain its pioneering position while it could be an extremely successful product that could boost the company from a financial performance perspective.?

Vision Pro is released?

On Friday, February 2, Apple began selling the Apple Vision Pro spatial computer after two weeks of pre-orders. The mixed reality headset starts at $3,499. The device is currently only available in the US but Apple plans to roll it out to other countries later this year. A day earlier, in an announcement, Apple said that more than 600 applications have been built specifically for Apple Vision Pro. These include video games and applications for productivity, communication and entertainment.

Apple has a cult following that lines up to buy new devices when they are released. A blockbuster product will not only attract this strong following but also appeal to the general public. Its highly anticipated new VR headset is likely to improve market sentiment towards Apple and confirm the company's position as the market's dominant technology innovator.

While the Apple Vision Pro's hefty price tag raised concerns when the product launched last June, data from the first weekend of pre-orders showed strong initial demand.

According to famous Apple analyst Ming-Chi Kuo, Apple sold between 160,000 and 180,000 Vision Pro units in the first week of pre-orders, which shows that the device sold out as expected. According to analyst observations and reports, the expected shipping time for all Vision Pro devices will extend to 5 to 7 weeks immediately after the pre-order feature is enabled, a clear indication that Vision Pro is sold out.

Tim Cook, chief executive officer (CEO) of Apple, said: “Apple Vision Pro is the most advanced consumer electronics device ever created. Its revolutionary and magical user interface will redefine the way we connect, create and explore".

Also during a conference call with analysts on February 1, Apple executives introduced how to use computer headsets for businesses. Companies like Bloomberg, Nike (NKE), SAP (SAP), Stryker (SYK), Vanguard and Walmart (WMT) are using Apple Vision Pro “to deliver innovative spatial computing experiences to customers and their employees” said Luca Maestri, Apple's chief financial officer.

“From daily productivity to collaborative product design to in-depth training, we can't wait to see the amazing things our enterprise customers will create in the coming months and years” he added.

The AR/VR market still has much untapped potential

Today, the AR/VR headset market is in its infancy, with IDC projecting only 8.1 million AR/VR device shipments by 2023. According to Counterpoint Research, Meta dominated this market in the third quarter by 2023, accounting for 49% of total device shipments. Counterpoint data revealed that headphone shipments plummeted 29% year-on-year in the third quarter due to a lack of compelling headphone launches.

The relatively small size of the AR/VR headset market creates many opportunities for disruption, and Apple is known for successfully exploiting similar opportunities in other market segments.

According to IT market intelligence firm International Data Corp, Vision Pro could allow Apple to compete with Meta's (META) Quest 3 headset, which had a 55% share of the VR headset market in the third quarter of 2023.

Jefferies Group's stock analysts predict that Apple will capture just 4% of the VR headset market, with about 400,000 units shipped by 2024. The company notes that the Vision Pro is sold at a higher price than other comparable headsets like the Meta Quest 3, which start at around $500.

According to UBS analysts, Apple is said to be working on a cheaper version and second-generation Vision Pro, which could help address pricing concerns.

So how does AAPL stock look from Wall Street analysts' perspective?

In addition to launching Vision Pro, Apple also just released its first quarter financial report of fiscal 2024 with revenue and profits exceeding expectations. However, the company's shares still dropped 4% because investors are pessimistic about the iPhone's sales prospects this year, especially when the most important market, China, has dropped 13%.?

Specifically, in the last 3 months of 2023, revenue reached 119 billion USD with the largest contribution from iPhone (69.7 billion USD). Revenue of Mac and iPad both decreased compared to before to 7.78 billion USD and 7 billion USD. However, services increased to an all-time high of $23 billion. Revenue this quarter increased 2%, breaking a streak of four consecutive quarters with annual revenue declines. The company's net profit increased by 13% to nearly 34 billion USD.

Previously on January 18, Bank of America Securities upgraded Apple and raised its stock price target from $208 to $225, citing the company's promising AI product roadmap, along with other positive developments such as the improving prospects of the services segment.?

BofA also claims that Vision Pro sales could eventually surpass iPad sales in the long run, as VR becomes mainstream. Besides, they also added Apple to the US 1 list, a list of the bank's best investment ideas.

Morgan Stanley in its weekly Startup Report, identified Apple as one of the top high-quality growth stocks in the US among 56 other companies that appear well-positioned to deliver alpha returns this year.

Overall, based on the assessment of 25 Wall Street analysts, Apple's average stock price target is $206.07, which represents a 9.8% upside from the current market price. The stock receives a Moderate Buy consensus rating based on 16 Buys, 8 Holds and 1 Sell assigned over the past three months.?