How Will Vision Pro Affect Apple Stock?

With an official launch date of February 2, Apple’s (NASDAQ:AAPL) long-awaited Vision Pro VR headset is finally heading to the hands of consumers.

Though the tech world is excited about the possibilities the headset brings to Apple’s product line, investors must look to its economic potential and how the device could impact share prices.

How Much Value Could Vision Pro Add to Apple?

For several years, Apple has been much more focused on refining its existing product lines than releasing entirely new devices. This has led to accusations that the company is no longer innovative and could see slower growth over time.

In a qualitative sense, one of the most important value contributions the Vision Pro offers is a counter to this narrative and a renewed sense of Apple’s growth potential for investors.

On the business side, the Vision Pro could eventually be a large source of device sales revenue. With a $3,500 price tag, the device has the potential to add to Apple’s hardware sales, which declined in 2023. Paired with what is expected to be a strong cycle of iPhone upgrades as consumers buy devices with AI features, the Vision Pro could help Apple turn its device business around.

The development and release of the Vision Pro will also have significant synergies with another of Apple’s major initiatives, namely its enhanced presence in the gaming world. With an established presence in mobile gaming through iPhones and iPads, Apple is now pushing to make its Mac line a major component of the PC gaming ecosystem. With a widely available VR headset, the company could further increase its gaming revenues.

Apple will also be able to generate more value from the Vision Pro as its family of apps expands. At initial release, there will be about 230 apps supported by the device. By the middle of the year, however, it’s expected that this number will be closer to 500.

Revenue from app sales and subscription service fees, both much higher margin than device sales, will likely help Apple to fully capitalize on the headsets it sells.

With all of this said, it’s far too early to put a dollar figure on the total value of the Vision Pro once future sales, subscription revenues and other peripheral sales are taken into account. What seems certain, however, is that the device has the potential to eventually make a significant contribution to both Apple’s top-line revenue and bottom-line net income.

A Potentially Long Road to Significant Revenue

Despite the Vision Pro’s promising marketability, analysts believe that the device’s impact won’t be rapid.

Analysts expect the headset to sell about 600,000 units this year. At a price of $3,500 per unit, that will translate to about $2.1 billion in sales this year.

Apple will then likely cross the 1 million unit threshold by 2025, assuming consumers respond well to the product.

Bearing in mind Apple’s trailing 12-month revenues of well over $380 billion, Vision Pro sales in 2024 are apt to be a drop in the bucket.

It’s worth noting, though, that the headsets will also likely come down in price as time goes on, potentially leading to more sales.

Apple is also apt to gradually refine the design of the headset, eventually reducing its size down to something more akin to a pair of glasses. As this occurs, the company will gain the opportunity for repeat sales on future models, much as it has with its other product lines.

Will Apple Emerge as the Leader in the VR Ecosystem?

The economic success of the Vision Pro will ultimately depend on the device becoming the center of its own VR ecosystem.

Early signs suggest that Apple is laying the groundwork for just such developments. The headset, for example, launched with the ability to play 3D movies from Disney+, as well as content from a host of other streaming services. As time goes on, Apple will likely continue to build out its VR content library to provide consumers with more value.

Apple also enjoys a unique position when it comes to hardware sales. With a dedicated consumer following and an almost unmatched brand reputation, Apple can successfully market products that fail when presented by other companies. This consumer trust, paired with a gigantic marketing budget, may make Apple the company that finally succeeds in selling VR headsets as mainstream devices.

An excellent example of this ability to sell hardware could be seen in the opening presale weekend of the Vision Pro. Where analysts had previously projected 70,000 to 80,000 initial sales, Apple took orders for some 180,000 units. Given the hefty price tag, this performance indicates that Apple still has the ability to convince brand-loyal consumers to trust its new products.

It’s still important to note, however, that Apple is far from the first tech major to have taken a swing at making VR a practical reality for consumers. From the ill-fated Google Glass to the initial hype surrounding the concept of the metaverse itself, numerous projects have attempted to deliver virtual reality as a consumer commodity.

Historically, these efforts have either failed completely or produced lackluster results. For Apple to win where others have lost, the company will have to navigate unchartered territory.

How Will Vision Pro Affect Apple Stock?

In the short-term, the $2 billion in projected revenues from Vision Pro sales is unlikely to impact Apple stock in any meaningful way.

Although it will likely take time for the Vision Pro to have a meaningful impact on Apple’s share prices, the stock still looks like a fairly good buy at current pricing.

With a trailing 12-month net margin of over 25 percent and earnings projected to grow at a rate of 9.6 percent annually in the coming 5 years, Apple remains an incredibly profitable business.

Paired with stellar brand recognition and a competitive moat that even Warren Buffett is known to admire, these profitability figures make Apple an attractive buy-and-hold stock.

Analysts are also still optimistic about Apple’s prospects. The stock holds a consensus rating of buy, delivered by 30 of the 44 analysts currently covering AAPL shares. Though the stock is not expected to advance much this year, the long-term outlook for Apple remains strong.

It will most likely be some time before the benefits of the Vision Pro actually begin to show up in Apple’s earnings.

Early sales of the device and Apple’s experience in building revenue streams around its hardware, however, suggest that the Vision Pro will eventually become a significant source of both revenue and profit for the company.

Ultimately, the VR headset seems likely to provide Apple with a tailwind that will complement the company’s other growth initiatives and put slow and steady upward pressure on stock prices over the next several years.

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.