AAPL - Apple has a Vision for its AR/VR gear; What's next?

2023-06-06 06:00:19 ET

Apple ( NASDAQ: AAPL ) stock will be on watch again Tuesday after a momentous keynote presentation at its Worldwide Developers Conference Monday that resulted in its biggest product launch in nearly a decade.

The company made headlines by jumping into the premium augmented reality/virtual reality space with its Vision Pro headset -- a pricey, complicated bit of metal and glass that will cost $3,499 and won't be out until 2024 -- but it also announced a cavalcade of updated hardware and software, including more powerful in-house processors, a larger MacBook Air portable, new high-end desktop machines, and refreshes to its various operating systems (for phones, tablets, watches and Macs) as well as the new "spatial operating system" visionOS.

Apple stock ( AAPL ) rose 2.2% to an all-time high of $184.95 Monday morning in the lead-up to the WWDC announcements. But once investors heard that the premium headset might be even pricier and its release even further off than expected, the stock went negative on the day, closing down 0.8% .

As the Tuesday trading session comes into focus, the stock will still be on the verge of a historic milestone: just another 5% and change in gains away from becoming the first company to close a session with a value over $3T. It inched over the $3T line on an intraday basis on Jan. 3, 2022, before pulling back ahead of that day's close. (Apple had crossed the $1T valuation mark in summer 2018, and then $2T in summer 2020.)

It's already valued at more than then entire Russell 2000 ( IWM ).

Analyst reactions

It wouldn't surprise Seeking Alpha analyst Bill Maurer if the shares continue to see pressure in the near term, he said in reaction to the WWDC announcements. "Beyond the technicals that show the stock may be overextended, WWDC week is generally one of the worst for Apple shares ," he said. "This is usually because going into the annual event, expectations are tremendously high, so not everyone is satisfied when you have so many rumors coming out beforehand."

The stock was "certainly overextended" near term, and realizing that the new headset couldn't boost holiday 2023 sales didn't help, he noted. Seeking Alpha analyst and Investing Groups leader Jonathan Weber agrees on valuation, noting the company's pricing is high both for a hardware tech company and vs. Apple's historical trading range .

And Seeking Alpha analyst Kevin George reminds investors to be cautious, harking back to Apple stock's 30% downturn after the 2015 launch of the Apple Watch, and that "the Vision Pro release may take time to see investor adoption as its high-end price could be a deterrent until its applications are fully seen."

Bullish Wedbush analyst Daniel Ives notes the new headset is "laser-focused on courting the developer community," and that given the high price point, "we believe initial shipments are expected to be roughly 150K units for Year 1 and roughly 1M units in Year 2 at lower price points."

Of course, Apple revealed multiple other products and software enhancements in a "flex the muscles moment" for CEO Tim Cook and the company, Ives said. He's maintaining an Outperform rating and a $205 price target.

The Vision Pro showed off an "extremely impressive product demo and use cases," Evercore ISI analyst Amit Daryanani said, adding "the time frame to market and apps being built will be key." It's the "start of the next shift in compute," he said.

"Notably, this product will integrate seamlessly with other AAPL products and should feature negligible input lag between movement and response owing to a proprietary new Apple R1 chip focused on sensor processing. We see dual cases across productivity and entertainment making the higher ASP more acceptable, especially as apps get built around this," Daryanani said. He's maintaining an Outperform rating on Apple ( AAPL ) with a $210 target price, implying 17% further upside from here.

Other stocks to watch

Investors will also be watching the wide variety of stocks worldwide that fall into the massive orbit of Apple's supplier ecosystem, especially after the tech giant announced one of its most ambitious hardware projects ever.

That includes some key chipmakers, including TSMC ( TSM ) and Samsung Electronics ( OTCPK:SSNLF ). STMicroelectronics ( STM ) is a good bet to watch: It's already an Apple supplier (making power management chips for the iPhone) with capabilities in augmented reality/virtual reality. And Nordic Semiconductor ( OTCPK:NRSDY ) has made Bluetooth chips for Apple's AirPods.

Hon Hai ( OTCPK:HNHAF ) ( OTCPK:HNHPF ) is always on watch as an assembler of Apple hardware, as is Pegatron. On the display side, stakeholders will keep an eye on LG Display ( LPL ). And don't forget Japan's component makers, including Murata ( OTCPK:MRAAY ), TDK ( OTCPK:TTDKY ), Sony ( SONY ), and Sharp ( OTCPK:SHCAY ).

Disney stock ( DIS ) had been negative on the day, but once CEO Bob Iger showed up on the Apple stage to talk about a content partnership tied to the new headset, it erased losses and jumped into positive ground. And Unity Software ( U ) soared to a 17.2% gain Monday tied to its mention as a key Apple partner.

More on Apple

• Some Apple Savings account customers hit snags on withdrawals - report
• Apple says developers generated $1.1T in App Store ecosystem in 2022
• Can India become a new China for Apple? - Bernstein

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