“Conservatively, should the AR offering have a comparable trajectory as Apple Watch it could contribute $18.1B to sales. In a bullish scenario…” — Analyst Amit Daryanani
From a note to clients that landed on my desktop Thursday:
ALL YOU NEED TO KNOW: We think investors continue to underappreciate AAPL’s potential to innovate and enter new markets where they can leverage and scale AAPL’s unique platform and vertical integration capabilities. AR/VR have become a hot topic post FB’s pivot to the metaverse, but AAPL has been working on AR/VR solutions for the last 4+ years and we expect the hype into a formal launch in late 2022 to serve as a catalyst to the stock price.
An AR/VR device enables AAPL to extend their iOS and importantly their AppStore from iPhone to the VR world. Given the confluence of various AAPL patents (100+), acquisitions (Xnor.Ai, SensoMatic, NextVR, & more), app development resources, we believe it’s a high probability AAPL launches AR/VR headsets (internally dubbed N301) and/or Apple Glass (internally N421) over next 6-12-months.
Conservatively, should the AR offering have a comparable trajectory as Apple Watch it could contribute $18.1B to sales and 19c EPS at scale (~4-5% of current estimates). In a bullish scenario, should the adoption trend be close to AirPods the contribution could be $38B in sales and ~41c in EPS at scale (~8% contribution to sales/EPS).
We think the implied trust AAPL has built across both consumers and developer community could prove to be a key enabler for AAPL’s success. A recent (June-2021) survey by Brew-Harris suggested that 35% of consumers would prefer to buy an AAPL AR device (despite AAPL not having a formal product in the market)!
Net/net: We expect CY22 to be a strong year for new product launches ranging from i) iPhone SE3 in Q1, 2) Apple AR/VR, 3) iPhone 14 and More. Sticking with OP rating and taking target to $210 as we see wearables becoming an important growth vector.
Maintains Outperform rating, raises price target to $210 from $180.
My take: There’s a lot packed into this 30 page note, including lists of recent hires and personnel moves, patents filed in the last year and potential use cases — from 3D surgery to immersive live sports broadcasts.