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Apple (AAPL) stock's impressive ascent to new all-time highs of $195 has caught many off-guard. In some way or another, the tech titan keeps finding new ways to reinvent itself, regardless of how dire macroeconomic conditions seem. Given Apple's track record of out-innovating even its own hot-selling products, it should be no surprise to see Apple at new heights, even with a recession breathing down the neck of the American economy.
Undoubtedly, the iPhone still makes up a huge chunk of Apple's earnings pie. The company would probably continue to do fine by just leaning on the iPhone, while hiking the price of its latest model (the iPhone 15 is expected to see a price hike, according to Wedbush's Dan Ives) to keep earnings moving upward.
Still, Apple knows that all it takes is one technological breakthrough to turn a wide moat into a narrow (or non-existent) one. As a result, it's not content with standing still when it has considerable sums of cash to invest in next-level hardware. Further, it's not a mystery why the company is willing to step out of its comfort zone, even if it means cannibalizing a stable business that isn't at risk of any sort of technological disruption from any other firm out there.
In recent quarters, many analysts have shifted their focus on where the company is going next, rather than where it has been in the recent past. After all, the Apple headset, goggles, and glasses rumors have been ongoing for quite some time. Though the Apple Vision Pro may be the company's hottest new grower for the next decade, the firm remains committed to the iPhone, which may very well keep taking share at the international level. The way I see it, the iPhone is the present, while Vision Pro looks to be the future, perhaps the not-so-distant future.
Apple Vision Pro: A Glimpse of the Future is Just a Year Away!
In around a year, the Apple Vision Pro will launch the company into the virtual and augmented reality (VR and AR) market, starting in the States. The “metaverse” market is expected to be worth more than $426.9 billion by the conclusion of 2027.
That said, it's unclear which company will be able to capture the juicy gains to be had in what's sure to be a fast-moving market that will end up being a heck of a lot different than many tech-savvy folks think it'll be like. Surely, firms need to have a vision of how to break into a market before committing capital. Simply throwing billions on VR-related hardware and software with the intention of playing it by ear doesn't seem like a very good bet.
At the same time, a VR player needs to be agile enough as new features and services come to be. Indeed, Apple has a history of being swift enough to pivot when things off its radar suddenly move into the radar. Today's iPhone is a lot different than the one Steve Jobs envisioned more than a decade ago. It's still evolving, and Apple's willingness to embrace change will allow it to evolve as the tides of technology do.
At this juncture, it seems like Apple is one of few firms that actually have the visionary managers that could make virtual reality a new reality for its consumers.
Apple's Entry into Spatial Computing: 2024 Will Be About Building Demand; 2025 About Meeting Demand
Undoubtedly, the Apple Vision Pro headset seems like a tough sell with its $3,500 sticker price, especially given how tough the times have been. Still, Apple is known to prioritize the customer experience beyond all else. And it's this relentless customer-centric focus that could cause the Vision Pro to catch doubters off-guard.
Reportedly, Apple Stores will welcome consumers to make an appointment to try out a Vision Pro product once it's available. Indeed, the headsets are a tailored experience, and having a sales associate helping customers with the ropes may be the edge Apple has as it aims to show what people are missing out on with a hands-on approach. We'll find out in a year whether the Vision Pro can deliver.
I feel that demand could overwhelm supply despite the hefty price tag in what could be a recession year. Recently, Apple reduced its production forecast for Vision Pro due to supply-side challenges. Despite this, 2024 could be the year that Apple builds demand for its Vision headset, even if consumers aren't yet able to hand over their money. A cheaper headset is in the works and could land in 2025. This lower-cost product may be when Apple can meet supply with demand it built in the year prior.
The Bottom Line
Apple's Vision Pro could change the revenue breakdown meaningfully over the next decade. The product is the real deal, but it will take time before it delivers numbers reminiscent of the early iPhone days. In the meantime, the iPhone 15 will continue to be the needle mover.
As the company breaks into India, Apple seems destined for impressive growth from here, whether or not Apple Vision ends up succeeding the iPhone in the next 5-10 years. At nearly 33 times trailing price-to-earnings, the stock is the priciest it's been in recent memory. With all the growth drivers to come (Vision Pro, Indian expansion, services push, and AI prowess), it likely deserves to trade at these heights.
On the date of publication, Joey Frenette had a position in: AAPL . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
