Apple (NASDAQ:AAPL) stock recently hit a new all-time high, just over a week after the company unveiled its “spatial computer” to the world. Undoubtedly, it seemed like the Vision Pro announcement was a “sell-the-news” type of scenario, with shares sinking amid the keynote before eventually recovering.
I don’t know whether it was the shocking price ($3,499), the lack of “killer” apps, a lack of overusing the word “AI,” or the lengthy wait (it goes on sale in early 2024 in the U.S.) before fans can actually give Apple their money. Regardless, Apple’s post-keynote reaction was somewhat muted, especially since the company delivered the new device that we’ve been waiting years for.
In any case, the headset reveal was on virtually everybody’s radar, with many analysts that already factored in Vision Pro sales into their financial models before the keynote. Nonetheless, relatively low expectations have me very bullish on the stock, even near all-time highs.
Apple Vision Pro May Very Well be the Best Headset Yet
Understandably, VR and AR have struggled to take off thus far, and the headset market still has a haze of uncertainty clouding it. Not to mention a potential recession could curb demand for the first Vision Pro model. For years, the technology and pricing appeared to have held the field of spatial computing back from living up to its potential.
As Apple looks to take its shot in the space, I do think far too many people are over-curbing their enthusiasm when it comes to headset sales and the ability for visionOS (Vision Pro’s operating system) to gradually take the place of tvOS, macOS, or even iOS. That’s probably because there have been a lot of colossal flops when it comes to headsets over the years.
Many influential companies gave it their best shot and have failed to deliver. Still, this is Apple we’re talking about. Apple is not a company that throws new ideas at a wall to see what sticks. It’s also not one to jump on the bandwagon or chase hot trends that don’t have the potential to generate considerable earnings growth over a reasonable timeframe. If it were a trend chaser, like so many firms seem to be these days, it would have shined more light on AI innovations.
Indeed, Apple can still innovate on the front of AI. It’s just doing a better job of keeping the technical aspects behind the scenes. Further, Apple is all about safety and security when it comes to tech. It knows the dangers of unregulated AI and large language models (LLMs) in this early “wild-west” era.
The technology may be amazing, but if there’s no clear view of risk and reward, it may prove wise to stick on the sidelines for now. In the AI era, there is no room for the “move fast and break things” mentality. That doesn’t mean Apple won’t join the “AI race” in the future, though, perhaps once regulators catch up. CEO Tim Cook is impressed by the technology and previously admitted to using ChatGPT himself.
Are Too Many Analysts Downplaying the Technology?
It’s always a good idea to have modest or realistic expectations regarding emerging technologies. For instance, though Meta Platforms (NASDAQ:META) stock has more than doubled this year, it’s more AI and social media to thank than the so-called Metaverse or the Meta Quest headset.
Arguably, Meta’s metaverse may be holding it back from rallying even more. Late last year, when Meta stock was in the gutter, billionaire tech investor Brad Gerstner wrote an open letter to Meta asking for less cash to be poured into metaverse bets, among other requests.
As VR and AR technology evolve, I do believe analysts could be caught revising to the upside in a few years after demand shows to be far better than expectations. Only time will tell if Vision Pro is a mass-market device that everyday Apple users will buy or plan to buy once they can afford to.
Regardless, I believe there’s a good chance that the demand could crush estimates in a year. Yes, $3,499 is not cheap, but as the app library grows alongside consumer savings (they have a year or so to save up), don’t count me as surprised if Apple struggles to keep up with demand 18 months down the road.
Wedbush’s Daniel Ives is a long-time bull on Apple stock. He recently hiked his price target on AAPL from $205 to $220. Ives stated that Apple is “playing chess while others play checkers,” also calling Vision Pro a “revolutionary product.”
Despite this, he sees just 150,000 units selling in the first year and 1 million in the second. Personally, I think first-year unit sales could easily pass 1 million, and if that’s the case, Ives and other analysts may have a few more upgrades up their sleeves.
Is Apple Stock a Buy, According to Analysts?
Turning to Wall Street, AAPL stock comes in as a Strong Buy. Out of 29 analyst ratings, there are 22 Buys and seven Holds.
The average Apple stock price target is $189.17, implying upside potential of 2.3%. Analyst price targets range from a low of $149.00 per share to a high of $210.00 per share.
The Bottom Line on Apple Stock
Apple stock is trading at a historical premium at 31.5 times trailing price-to-earnings. Despite this, I still view AAPL stock as a bargain. Vision Pro sales estimates vary among analysts, but most may be heavily underestimating demand. As such, I’m sticking with the stock as it inches closer to $3 trillion territory.