Apple: Not Facing Reality

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Apple: Not Facing Reality

Seeking Alpha2022-02-15

SummaryApple appears set to launch a mixed-reality device by early 2023 based on leaked reality OS source code.The product isn't expected to materially impact finances of the tech giant for at least 5...

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Pg kia
·2022-02-15
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Universe宇宙
·2022-02-15
The operating system powering Apple's new mixed-reality device appears to have a name now in"reality OS". iOS developers have caught the OS name referenced in multiple locations in source code and App Store uploads.$Apple(AAPL)$
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kiasu
·2022-02-15
Hope things pick up
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superduper
·2022-02-15
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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nApple: Not Facing Reality\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-02-15 10:33 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4486743-apple-not-facing-reality><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryApple appears set to launch a mixed-reality device by early 2023 based on leaked reality OS source code.The product isn't expected to materially impact finances of the tech giant for at least 5...</p>\n\n<a href=\"https://seekingalpha.com/article/4486743-apple-not-facing-reality\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"AAPL","symbol_name":"苹果","start_time":0,"source_url":"https://seekingalpha.com/article/4486743-apple-not-facing-reality","article_id":"1121828716","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1121828716","pubTimestamp":1644892386,"sourceInfo":null,"weMediaInfo":null,"summary":"SummaryApple appears set to launch a mixed-reality device by early 2023 based on leaked reality OS s","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"AAPL":"苹果"},"translate_title":"苹果：不面对现实","themeId":"","isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AAPL":0.9},"content_text":"SummaryApple appears set to launch a mixed-reality device by early 2023 based on leaked reality OS source code.The product isn't expected to materially impact finances of the tech giant for at least 5 years.The stock still isn't facing the reality of slow growth for years ahead with Apple still trading at 28x FY22 EPS targets.While Apple(AAPL) appears set to release a mixed-reality device next year, the market isn't facing reality with the stock. The tech giant appears set to launch the new device based on recent leaks, though the speculated device still appears immaterial to the business for years. My investment thesis continues to warn investors that the future growth rates don't match the current stock valuation.Mixed RealityThe operating system powering Apple's new mixed-reality device appears to have a name now in\"reality OS\". iOS developers have caught the OS name referenced in multiple locations in source code and App Store uploads.The news suggests Apple is getting closer to releasing an AR/VR device after reports suggested the tech giant was struggling to complete the device rumored since at least 2017 when Apple purchased VR company VRvana. The latest credible news source has the device delayed until early 2023 with a release prior to the WWDC in June allowing for the developers conference to focus on AR/VR apps. The company plans to release a sleeker pair of AR glasses at a future date.The reports of the device overheating along with camera and software issues does question the timeline for the device release, but the software updates do suggest Apple is priming the ecosystem for an imminent release of the device in the next year.The biggest question remains the revenue opportunity in the AR/VR segment. The most recent major product launched by Apple was the Watch back in 2015. The Apple Watch sold an estimated 8.3 million units back in launch year 2015 and has seen sales grow to 46.1 million units in 2021. COVID-19 definitely created a boom in the category during 2020 leading to sales growth of 40x.Source: Business of Apps*The table incorrectly shows 2019 twice, instead of 2021.The Watch product generates an estimated $12 billion to $14 billion in annual sales now. Any AR/VR device will sell far fewer units due to the estimated price in the $1,000 range compared to a watch selling for $300+.Star Apple analyst Katy Huberty had already estimated the device would generate minimal revenues in the early years. Her forecast has FY26 AR/VR product revenues reaching $29 billion based on the tech giant shipping 31 million units at an average price point of ~$750. Analyst Ming-Chi Kuo expected2023 sales of 3 million units with a second-generation device approaching 10 million units in 2024. Of course, these numbers were before the recent product delay.In the early years, the Apple Watch was only producing up to $3 billion in annual sales. The product didn't really take off until the 2nd/3rd generation released in 2018 and 2019.A similar path for the AR/VR device would predict a successful product wouldn't provide a material growth path until 2026 and beyond. Remember, Apple is forecast to produce FY25 revenues of $463 billion.Even a product with $10 billion in annual sales won't move the needle for just the Wearables, Home and Accessories category of Apple for the tech giant reported FQ1'22 category revenues of over $14 billion. The total FY21 category revenues were $38.3 billion making a successful AR/VR device only a fraction of this division's revenue alone. Between the Watch and AirPods, the AR/VR device will struggle to even become the leading wearables device.Source: Business of AppsStiff CompetitionWhile most people have already penciled in Apple releasing a successful mixed-reality device within the next year, the tech giant isn't guaranteed success next year.Meta Platforms(FB) already has a hot AR/VR device on the market with plans to at least match Apple, if not top the company in releases of additional category products.The Oculus Quest 2 was a hot holiday product topping the App Store charts. Consumers have spent over $1 billion on Quest store content already.At Facebook Connect, CEO Mark Zuckerberg outlined the product cadence as part of the development plan leading to the Reality Labs division to producing a $3.2 billion quarterly loss.Project Cambriaappears set to at least match the mixed reality headset coming out of Apple likely in early 2023. The potential \"Oculus Pro\" appears the next device in a planned step to true AR glasses in the future after releasing smart glasses with Ray Ban recently.The big issue is that Apple faces a competitive landscape in the AR/VR device category. The competition appears far more fierce than the Watch segment where several Chinese and a small domestic company are the next toughest competitors.Investors need to face the reality that AR/VR success isn't guaranteed and won't materially impact revenues and profits for at least 5 years, similar to the path of the Watch. After the big FQ1'22 earnings beat closed out the final demand pull forward and iPhone 5G boost, the new reality is slow EPS growth for a period. Analysts rightfully only forecast Apple producing EPS growth in the 5% to 10% range for the next 3 to 4 years.Data by YChartsThe biggest risk with the stock trading at 28x FY22 EPS estimates is a period where sales dry out from the pull forward during the economic lockdowns forcing WFH scenarios. As evidenced by the booming Watch sales numbers in 2020, consumers might quickly shift towards epic trips this year instead of buying another smartwatch or iPhone.Most companies from Netflix(NFLX) to Roblox(RBLX) to even Meta Platforms have already run into issues with weakening sales trends. Even great companies like Apple can't avoid such trends.TakeawayThe key investor takeaway is that Apple investors need to face the new reality. The upcoming mixed-reality device from the tech giant isn't a guaranteed success, but the market is already pricing in massive sales from a device that clearly won't deliver material sales for up to 5 years.Investors should use the recently elevated stock price above $170 to exit Apple close to the highs.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[{"id":9095683546,"gmtCreate":1644895866897,"gmtModify":1676533973500,"author":{"id":"4105621810466220","authorId":"4105621810466220","name":"Pg kia","avatar":"https://static.itradeup.com/news/757b1da54df911cfacfc34e090c40827","vip":1,"crmLevel":3,"crmLevelSwitch":0},"htmlText":"Like!&nbsp;","listText":"Like!&nbsp;","text":"Like!","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9095683546","repostId":1121828716,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9095680287,"gmtCreate":1644895336744,"gmtModify":1676533973453,"author":{"id":"3585001294737518","authorId":"3585001294737518","name":"Universe宇宙","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"hat":"https://static.tigerbbs.com/b073a07f77dbe6b3bec6b12311fde6bd","crmLevel":6,"crmLevelSwitch":0},"htmlText":"The operating system powering Apple's new mixed-reality device appears to have a name now in\"reality OS\". iOS developers have caught the OS name referenced in multiple locations in source code and App Store uploads.<a href=\"https://ttm.financial/S/AAPL\">$Apple(AAPL)$</a>","listText":"The operating system powering Apple's new mixed-reality device appears to have a name now in\"reality OS\". iOS developers have caught the OS name referenced in multiple locations in source code and App Store uploads.<a href=\"https://ttm.financial/S/AAPL\">$Apple(AAPL)$</a>","text":"The operating system powering Apple's new mixed-reality device appears to have a name now in\"reality OS\". iOS developers have caught the OS name referenced in multiple locations in source code and App Store uploads.$Apple(AAPL)$","images":[],"top":1,"highlighted":2,"essential":1,"paper":1,"likeSize":5,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9095680287","repostId":1121828716,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9095612585,"gmtCreate":1644894493793,"gmtModify":1676533973107,"author":{"id":"4092749392657430","authorId":"4092749392657430","name":"kiasu","avatar":"https://static.tigerbbs.com/c5b330f41570d56bc03dec4b28f3ae0d","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"Hope things pick up","listText":"Hope things pick up","text":"Hope things pick up","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9095612585","repostId":1121828716,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9095611869,"gmtCreate":1644893472978,"gmtModify":1676533973038,"author":{"id":"3581550518409224","authorId":"3581550518409224","name":"superduper","avatar":"https://static.tigerbbs.com/04a121c70123b41a7011f9ec45096505","vip":1,"crmLevel":5,"crmLevelSwitch":0},"htmlText":"Like","listText":"Like","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9095611869","repostId":1121828716,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":57,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}