Meta Platforms’ vision of selling a future where people work, play, and interact in a virtual world may finally be getting its long-awaited confirmation thanks to an unlikely partner.
Last Monday, Apple unveiled a highly anticipated mixed reality product known as Vision Pro at its annual Worldwide Developers Conference. The product, which is expected to hit the market in 2024 and cost a whopping $US3,499 ($5,200), allows users to interact with content and popular iPhone apps without a controller.
Apple’s launch comes at a time when interest in the metaverse appears to have waned and investors are pinning their hopes on the promise of artificial intelligence.
It has been more than a year and a half since Meta Platforms started betting. So confident in the bright future of the metauniverse, Facebook in 2021. rebranded as Meta Platforms to better reflect their vision beyond social media. At the time, CEO Mark Zuckerberg called the metaverse “the next frontier” and compared it to social networks when the company launched.
With big bets on Meta, brands like Walmart, Roblox, and popular casual dining chain Chipotle Mexican Grill were quick to jump on the trend. Even luxury brands like Gucci have entered the virtual world.
That hype quickly died down as the economy slowed and tech stocks hit a wall, leaving many investors questioning Meta’s gamble and whether the masses would buy into the vision.
More than a year and a half later, Apple’s Meta version may finally offer some much-needed support to Meta’s over-ambitious vision and lure once-skeptical investors back into the virtual world.
“It’s a huge point of validation,” said Gene Munster of Deepwater Asset Management. “The big picture metaverse is taking a step forward.
So far this year, the Meta’s have returned after 2022’s sell-off; the stock rose more than 120 percent. However, these gains are mostly due to the company’s focus on cost reduction and AI rather than the potential of the metaverse.
Apple Bets on ‘Grand Slam’
For years, Wall Street considered Apple a technology bellwether. It is one of the largest companies worldwide and larger than many foreign markets. It makes up nearly 7.5 percent of the S&P 500’s weighting, with a market capitalization of about $2.85 trillion as of Friday’s close. The stock hit an all-time high earlier this week before retreating.
“You’re so big, you can’t have new products that work well,” said Paul Meeks, portfolio manager at Independent Solutions Wealth Management. “Everything you do has to be a ‘grand slam’ so the stock doesn’t go up.”
Wall Street and investors are expecting a relatively muted start to the market. JPMorgan’s Samik Chatterjee said in a recent note that he is not on the lookout for large volumes, although he sees the headset as a “potential catalyst” for the industry in the long term.
Apple has proven in the past that user engagement can lead to a willingness to pay a higher price, and Apple’s focus is on user engagement rather than first-device volume, which will of course be several years away. platform,” he wrote.
Advisors Capital Management’s JoAnne Feeney saw the first iteration as a smaller market for wealthier, ardent fans and creators. It expects newer, more affordable models at different price points down the road, similar to the iPhone’s trajectory.
Releasing a product, even at a high price, encourages the developer community to build consumer apps and allows Apple to defer the costs incurred in developing the app, the portfolio manager said.
It should also generate similar excitement around the Meta headset platform, according to Deepwater’s Munster.
It looks like a complicated microphone
Apple’s foray into virtual reality couldn’t have come at a worse time, as lingering fears of a recession and still-high inflation eat into consumers’ pockets and wipe out big-ticket purchases.
Because the company and the metaverse vision are so dependent on consumer adoption, it creates a difficult near-term setup, Meeks said.
But that background could be very useful for Meta’s Quest Pro at less than a third of the price, pointed out DA Davidson’s Tom Forte, who downgraded Apple by a penny.
While some fear that the hefty price tag might scare away most buyers, many investors are paying attention to past product launches. When the iPhone debuted in 2007, investors scoffed at the high sticker price, and a similar phenomenon occurred when the Vision Pro was unveiled.
More than 15 years after the release of the iPhone, Apple has captured a large share of the global smartphone market and managed to convince consumers to wait hours in long lines for the latest models. The iPhone 14 starts at a whopping $799.
Apple may not always offer the best price for the consumer, but it always enters the market for top-end designs, often later than its competitors when it comes to building features, Feeney said.
Bernstein’s Toni Sacconaghi emphasized in a recent note that the company is successfully creating new markets through its products. Its entry into the smartphone, wireless, and music player industries has grown the market tenfold in five years, he said.
“We believe that the adoption of AR on the web will be a long-term journey and not financially significant for Apple in the near term,” he said.