Apple Hopes Its Vision Pro Headset is the Next Big Thing

After years of anticipation, Apple (AAPL) released its Vision Pro headset on Monday. However, the market was not initially impressed as the stock retreated from a record high Monday and is modestly lower today.  Many analysts are concerned that the $3,499 price tag of Apple’s headset will limit its mass-market appeal.

With its elevated valuation, Apple needs positive news to maintain its record-high price.  With Apple up +38% this year, the stock is priced at 28 times profit projected over the next 12 months, the highest since early 2022.  In contrast, the average multiple in the S&P 500 technology hardware and equipment index is 18 times, the same as Apple’s average price multiple over the past ten years. With analysts projecting Apple’s sales this year will decline for the first time since 2016, most of the stock’s valuation reflects its balance-sheet strength rather than immediate growth prospects. 

Some analysts question whether consumers will be inspired to buy Apple’s expensive headset.  CFRA Research said Apple failed to identify why the headset is a must-own device for customers, “at least for now.”  Also, D.A. Davidson, who downgraded Apple Monday to neutral from buy following the release of the headset, said there are “important structural challenges” in terms of its adoption by consumers “which could limit the near-term impact on its sales and profitability.”

Apple hopes that its many third-party developers will soon create innovative uses for its extremely expensive device.  Apple entered into a deal with Unity Software (U) to help develop a games platform for the headset. Also, Apple is anticipating that the compatibility of the headset with existing iPad augmented reality apps will help boost its popularity.  However, it will be a challenge to convince developers to pour resources into a device that for a long time will have only a small number of users.

Morgan Stanley said it may take until October to learn more about initial volumes of Apple’s headset and the precise timing of its launch, and that much will depend on a “killer app” that takes the technology “from niche to mainstream.”  Bokeh Capital Partners said despite Apple’s high valuation “you buy it because it mints cash and the gravitational pull of it in the index makes you need to own it to keep up with the market.”  Also, “they reliably, every ten years or so, come out with products we didn’t know we needed.” 

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.