Apple’s Metaverse Prospects Produce Real Optimism for Investors

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The iPhone maker hasn’t revealed its plans for virtual worlds, but many are betting the company will introduce extended-reality devices

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Earlier this month Apple briefly became the first corporation to exceed $3 trillion during intraday trading. Investors and analysts say they are betting that Apple will introduce expanded reality devices sometime in the next year or so and open up possibilities for a new phase of growth in the coming years.

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The company, for its part, has little say about future plans, although chief executive Tim Cook has praised such technology in recent years, saying it will be an important part of Apple’s future.

Interest in the Metaverse has gained new momentum after Facebook co-founder Mark Zuckerberg announced on October 28 that he was renaming his company Meta Platform. Inc.

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To highlight its push to capitalize on the nascent world of virtual reality and augmented reality, better known as VR and AR. While Meta’s share price has risen 7% since then, Apple’s price is up 18% to $175.08 on Tuesday.

Morgan Stanley’s longtime Apple analyst Katy Huberty last month upgraded her price target for the company’s stock from $164 to $200 per share to bake in a future value tied to those product lines.

“New product categories need to be priced,” he wrote in a note to investors on December 7. “In conversations with enterprise-backed AR/VR companies, the general consensus is that the real catalyst for mass AR/VR adoption will come when Apple enters the market.”

So far the metaverse has been mostly hopes and dreams, but proponents say it will eventually be a digital realm where people regularly use virtual avatars to work, play, shop and enjoy entertainment. Analysts believe that Apple may expand its ecosystem of hardware, software and services into this new realm.

Tony Sacconaghi, an analyst at Bernstein, recently told investors that Apple could ship 22 million augmented reality devices by 2030, leading to a 4% increase in revenue, and that augmented reality devices total revenue by 2040. may represent more than 20% of the

Apple is on a collision course with other tech giants to stay at the forefront of this latest technology, renewing old tensions, even as it remains unclear how big a market for virtual worlds will be. Meta has sold VR headsets for years and has aggressive plans to expand, and Microsoft Corporation

Sells an AR headset and has talked about its plans for the Metaverse.

As with Apple, some analysts are looking to see the company make progress on another long-term project, an electric car—even if the company continues to see talent traded within the project.

Dan Morgan, a senior portfolio manager focused on technology at Synovus Trust Company, said, “Many analysts are looking to diversify from its core iPhone business into other revenue generators such as augmented and virtual reality, the metaverse, as well as autonomous vehicles. pointing to potential.” ., which counts Apple among its largest holdings “even though these segments are several years away from contributing significantly to Apple’s total revenue.”

The last three months of the calendar year are often a strong quarter for Apple shares as the company launches its latest iPhone in September and enjoys big sales during the holiday shopping season.

But the latest excitement on Apple’s stock is a turnaround from similar periods in previous years as the company reported record results for its fiscal year that ended in September, as the first 5G-capable iPhone lineup soared sales and profits. Apple’s stock performance often slackens after such a big year, as investors await the next big upgrade to the iPhone.

Instead, Wedbush analyst Dan Ives last month raised his price target from $185 to $200 based on his growing confidence in the latest version of Apple’s smartphone, the iPhone 13 lineup.

Analysts have raised their price targets for Apple on average over the past year. According to FactSet, the average target was $128 per share in December a year ago, compared to $174.59 on Tuesday. Still, it means that most analysts keep the stock price below its current level.

The advent of the metaverse could focus attention on the extent of Apple’s clout. Concerns about Apple’s power in that new arena were at the core of a high-profile antitrust lawsuit brought by “Fortnite” maker Epic Games Inc., which argued that the large company had an unfair monopoly on the distribution of software on its iPhones. was kept. Epic is concerned that Apple’s terms and commissions will move to a new platform.

The high-profile courtroom drama presented one of the biggest threats to Apple’s lucrative App Store. After a 16-day trial, a federal judge in September ruled mostly in Apple’s favor, though the company had to ask users inside its apps about alternative payment methods to get around Apple’s in-app purchase system. Ordered to stop telling, which captures about 30% of digital revenue.

On December 8, a US appeals court granted Apple’s request to delay that order, which effectively means the company could potentially put off any major changes for years—another good deal for Apple investors. There is news.

Write Tim Higgins at Tim [email protected]


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