Apple (NASDAQ:AAPL)
Apple stock was downgraded by D.A. Davidson from Buy to Neutral, and the firm reduced its price objective from $193 to $185.
At this year’s Worldwide Developers Conference on Monday, Apple (NASDAQ:AAPL) showed off several new items, including the Apple Vision Pro mixed-reality headset. Apple’s (AR/VR) headset is scheduled for sale in early 2024 for $3,499 on Apple.com and in Apple retail outlets.
According to experts at Davidson, the headgear has the potential to be the most important new piece of hardware released by Apple since the iPhone in 2007. The company lowered the Apple stock because it believes the market already accounts for any positive developments related to the introduction of AR/VR products.
The analysts also believe that Apple has significant structural obstacles in the consumer adoption of AR/VR devices, which may mitigate the effect on its sales and profits in the short term.
The company thinks Apple’s foray into AR/VR devices will help speed up the industry’s overall adoption rate but notes that structural barriers still exist.
According to industry experts, AR/VR gear prices still need to be more exorbitant for widespread consumer adoption. The fact that Apple’s asking price is $3,499 doesn’t alter this.
While Disney+ is planned to be accessible from launch, the company is adopting a wait-and-see strategy until additional content and apps become available, which is necessary to make it more widespread.
Analysts have also said that Apple has been unable to develop a headgear for augmented reality or virtual reality that is aesthetically pleasing. The two-hour battery life is another drawback in the company’s eyes. The company also claims that some users experience nausea while using AR/VR headsets, which may slow widespread adoption.
For Meta Platforms, this might be good news.
Meta’s AR/VR headset, the Meta Quest 2, retails for $299, and the company now unveiled the $499 Meta Quest 3, due to launch this autumn.
According to the experts, Meta has a lot to gain from Apple’s push for consumer adoption and Facebook’s parent company’s far more affordable hardware.
Meta’s Reality Labs division, which includes sales of AR/VR-related content, gear, and software, brought in $2.2 billion in revenue in 2022.
Analysts justified the $185 price increase by citing the company’s revised discounted cash flow model, which they claimed accounted for its long-term adjusted EBITDA margin forecast of 35.0% (unchanged) compared to 30.8% in FY22.
The slight improvement in the company’s near-term sales and profit expectations due to the new product introduction has been somewhat offset by the rise in the discount rate (with the 10-Year Treasury Yield at 3.7%).
With the 6 June premarket, AAPL dropped 2.59% to $178.83.
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