Apple faces a big challenge ahead in trying to convince people to buy a pricey computer headset that doesn't have a clear must-have use.
Apple's Vision Pro headset, the tech giant's first major new product since the Apple Watch debuted in April 2015, is billed as a spatial computer. That's a foreign concept to most people, which is why some analysts aren't sure it'll take off.
"Who's this for? I'm not 100% clear on it," IDC analyst Ramon Llamas told Investor's Business Daily. "That's something I'm still struggling with."
Apple's advertisements and media messaging ahead of the product's Feb. 2 launch appears to take a shotgun approach, pitching the product for three primary uses.
The $3,500 headset will provide "the ultimate entertainment experience," new methods of collaboration and communication, and "an infinite canvas for productivity," Apple says.
The Apple Vision Pro looks like a bulky pair of ski goggles but it is packed with cutting-edge technology combining virtual reality and augmented reality. It features a physical dial for wearers to switch between virtual reality and the real world. Users control the device with hand gestures, eye movements and voice controls.
Early Buyers Are Apple Fans, Developers
Since it began taking preorders for the Apple Vision Pro on Jan. 19, the company has sold about 200,000 units, according to media reports. But the initial production run is going to Apple fanatics and software developers who don't want to miss out on the potential next computing paradigm, analysts say.
A key question Apple needs to answer involves identifying the target market for Apple Vision Pro. Apple's decision to brand its headset as a "Pro" product signals the company's intent to target professionals and well-heeled consumers with the first-generation device.
But do professionals need the virtual large-screen or multiple-screen capabilities that the Vision Pro provides? Or does a notebook or desktop computer setup work just fine for them?
"If you're a knowledge worker, you can do all that on PCs," Llamas said.
As for consumers, the Apple Vision Pro is a very expensive device if the main value proposition is providing a virtual big-screen TV, he said.
"From a technological standpoint, it looks incredibly impressive," Llamas said. "But for whom and to what end? I think for now, those remain open questions."
Why Enter Headset Market?
Mike Boland, chief analyst at ARtillery Intelligence, has another pressing question for the Apple Vision Pro: Why is Apple launching this product? And why now?
The answer is tied to the maturing smartphone market, Boland told IBD.
"The iPhone has been their cash cow and the source of their massive value creation over the last two decades," Boland said. "And it's no secret that smartphones are maturing as a product. They're reaching global saturation."
Each year's new iPhone model offers just incremental upgrades, he said. So, Apple is looking to create a new platform ecosystem. And it chose an emerging market that might ultimately evolve into lightweight, augmented reality smart glasses that could someday replace the iPhone, he said.
But smart glasses nirvana is still many years away because the technology is immature.
'A Classic Apple Long Game'
What Apple is doing with version one of its Vision headset is making a bet on the future, Boland said. And as it has shown with the iPhone and Apple Watch, it will make it better with each iteration.
"This is a classic Apple long game," Boland said. "Apple is presenting its vision of the future."
It's been nearly a decade since the company unveiled the Apple Watch. At least back then, people knew what a wristwatch was.
With the Vision Pro, Apple is entering a space that today is mostly dominated by virtual reality headsets for gaming and the metaverse from the likes of Meta Platforms and Sony.
"For the first time in a long time, Apple is really being bold," Gartner analyst Tuong Nguyen told IBD. "They are going out and pushing that edge."
Starting Gun For Spatial Computing Age
The launch of Apple's mixed-reality headset is a big deal for the tech industry because Apple's entrance validates the market.
"This is a pivotal event," Llamas said. It's the starting gun for the spatial computing age, he said.
Media reviews of the Apple Vision Pro praised its technology and potential. But social media wags groused about its high price and commented about how goofy wearers looked.
The first iteration of Apple Vision is almost like a developer kit, Boland said. The experience relies almost entirely on apps that Apple itself has created for the device.
Meanwhile, high-profile companies such as Netflix, Spotify and Google's YouTube have taken a pass on making apps for the headset. Social media firms such as Meta's Instagram and TikTok have opted out for now as well.
Selling Three Models Of Apple Vision Pro
The biggest knock on the Apple Vision Pro has been its price tag.
The Apple brand has long stood for affordable luxury, but the Vision Pro is an expensive device even for Apple.
The Apple Vision Pro starts at $3,499 for the base model with 256 gigabytes of storage. A midrange model with 512 gigabytes costs $3,699. And the top-of-the-line model with 1 terabyte of storage costs $3,899.
Plus, users with vision correction lenses will need to buy Zeiss Optical Inserts for $149. Lenses for reading cost $99.
Then, there are accessories to consider, such as a carrying case for $199 and extra external battery packs for $199 each. Apple also suggests you protect your device with its AppleCare+ service plan, which costs $24.99 a month.
Entertainment Is Main Selling Point
Oppenheimer analyst Martin Yang thinks entertainment applications will be the main selling point for the Apple Vision Pro early on.
"Near term, we see passive media consumption as the go-to use case for Vision Pro, ahead of productivity/work," Yang said in a recent note to clients. He rates Apple stock as outperform with a price target of 200. Apple shares ended regular-session trading Wednesday at 184.40.
At launch, users will be able to access more than 150 3D movies for rent or purchase from the Apple TV app. Those movies include recent hits such as "Avatar: The Way of Water," "Dune," "Spider-Man: Into the Spider-Verse," and "The Super Mario Bros. Movie."
Vision Pro also introduces Apple Immersive Video, a new entertainment format that puts users inside the action with 180-degree, three-dimensional 8K recordings captured with spatial audio.
Plus, the headset can record and play back spatial videos for reliving memories. People also can capture spatial videos with their iPhone 15 Pro or iPhone 15 Pro Max and experience them later on Vision Pro.
In addition, Apple Vision Pro users can play immersive spatial games such as "Game Room," "What the Golf?" and "Super Fruit Ninja."
Apple Vision Pro Is 'Sold Out'
It will take a while to determine whether Vision Pro is a success or not. Apple limited the initial production run, so it could say the product is "sold out," Boland said. Apple also wants to learn from early adopters what they liked and didn't like about the product, so they can make changes in the next version. Also, Apple Vision Pro is only available in the U.S. for now.
When Apple will come out with a second-generation device is an open question. But analysts are hoping for a cheaper version of the device by late 2025.
Meanwhile, rivals like Meta, Alphabet's Google and others are sure to innovate based on what Apple has introduced.
Wedbush Securities analyst Daniel Ives on Tuesday raised his forecast for Apple Vision Pro sales this year. He now expects Apple to sell roughly 600,000 units in 2024 vs. his prior estimate of 460,000.
Apple could sell "north of 1 million Vision Pro units" in 2025, if it comes out with a lower-priced headset, Ives said in a client note. The second-generation model could be priced around $2,000, he said. Ives rates Apple stock as outperform with a price target of 250.
The next milestone for the Apple Vision Pro likely will be the company's Worldwide Developers Conference in June. Apple introduced the headset at last year's WWDC and software developers have been working on apps for the device since then.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
