Apple (NASDAQ:AAPL) ran laps around the competition with its iPhone. That device contributed to Apple’s ascent to become the world’s first trillion-dollar company. The tech giant now has a market cap close to $3 trillion but has struggled with innovation for several years. However, it may be time to get excited about Apple stock again. The company’s Vision Pro is an innovative product that uses augmented reality to have its operating system interact with the outside world.
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Instead of looking at your computer screen, you can access apps by looking at them in front of you. You can use your eyes, hands, and voice to navigate the dashboard. The technology resembles something out of Iron Man and can give the company a meaningful revenue stream. I am neutral on the stock but may become bullish if the Vision Pro experiences high demand.
Apple’s Current State
My ability to become bullish on Apple primarily depends on how the market responds to Apple’s new product. Augmented reality, or as Apple calls it, spatial computing, can be the next big thing.
Beyond this product, Apple’s financials haven’t been impressive. Stock gains have outpaced revenue and net income growth over several years, and the latest earnings report continued that trend. The tech giant’s revenue only inched higher by 2% year-over-year in the first quarter of Fiscal 2024, and that is a concern worth monitoring. Net income was up by 13% year-over-year, though, which offered some good news.
There is speculation that the Apple Vision Pro sold over 200,000 units in the first 10 days of preorder. This number comes from an insider who has access to the data. While official news from Apple would be more encouraging, this is a positive first step.
How the Current Sales Can Impact Apple’s Finances
Customers have the choice to pay $3,499 once or pay $291.58/mo for 12 months. Prices are higher if you want more than 256GB of storage. Assuming each customer paid $3,499 for the Vision Pro, the company generated approximately $700 million so far. We will get a better idea of how well the product performed in Apple’s Fiscal Q2-2024 earnings report.
It’s worth noting that the company reported $94.8 billion in net sales in Fiscal Q2 2023. An extra $700 million won’t move the needle that much. That’s less than 1% of Fiscal Q2-2023 sales. However, those are the sales numbers over 10 days. If Apple continues the momentum and turns Vision Pro into a multi-billion dollar product line, it can have a tangible impact on revenue and earnings. Bullish investors are hoping for this possibility.
Generative AI Is In, While Electric Vehicles Are Out
I’m a bit skeptical about how the company’s investments in generative AI will play out. Tim Cook hinted at a big announcement later in the year, but buzzwords like these don’t immediately grab my attention.
There are plenty of tech companies that are further along in the process, and it seems like Apple is playing catch up. Granted, generative AI can have a significant impact on the upcoming iPhone models, but we can only speculate at this point.
Still, there is one recent announcement that should make Apple investors happy. The company announced that it is abandoning its electric vehicle project.
Electric vehicles never made much sense for the company. It was a distraction that took up time, resources, and manpower that could have gone toward innovations that made more sense for the company. Apple is shifting some of its electric vehicle workers to its AI division, which is easier to integrate within Apple’s products.
Is AAPL Stock a Buy, According to Analysts?
Analysts are feeling bullish about Apple. The stock carries 16 Buys, eight Holds, and one Sell rating, giving it a Moderate Buy consensus rating. The average AAPL stock price target of $206.15 implies 14.05% upside from the current price.
The Bottom Line on Apple Stock
Apple was once one of the best stocks to own. It has still outperformed the stock market over the past five years, but the past year hasn’t been nearly as impressive. The stock trades at a 28.2x P/E ratio and won’t get a lift if its financial growth remains stagnant. Recent net income improvements can help, but the company can’t reward long-term investors with 2% year-over-year revenue growth.
However, there is a lot of brand loyalty to Apple, and the company can get away with high prices. It’s a luxury brand that presents itself as an innovative company. The Vision Pro looks like the first truly innovative product the company has had in years, and it works well with the Apple ecosystem.
Apple investors will have to wait for the big announcement about generative AI. However, the Vision Pro is picking up momentum. It can become a mainstream product and a significant driver of revenue growth.
