This Could Be Huge for Apple Stock
Apple Inc. (NASDAQ:AAPL) has lost its luster and Apple stock is in a kind of limbo now. While the company retains its trademark reputation for innovative capacity, it has failed to excite customers as of late. This is not good for a company that thrives on enthusiasm, which at times has appeared as a parody of itself.
Apple stock is down more than 7.5% year-to-date. Those who dare might want to see what Apple stock was worth a year ago. It was trading at a now nostalgic $130.00 per share in the good old days of 2015. In fairness, that was a period of record highs.
So, AAPL stock is not quite in the doldrums yet and there is still upside potential. The problem is that sales of Apple’s iconic “iPhone” have slowed as the smartphone market has become oversaturated and users are demanding more significant advances. The iPhone accounts for some two-thirds of Apple’s revenue. Not even the much-touted Chinese market, which CEO Tim Cook has identified as essential for Apple’s success, has supplied any good news for the stock.
Competition in China has gotten tougher thanks to ever-improving local offerings from HTC and Xiaomi. These have made it more difficult for Chinese consumers to justify the purchase of an expensive iPhone. Moreover, the “Apple Watch,” presented as revolutionary when it first hit the market just over a year ago, must have raised many eyebrows at Apple board meetings. Apple Watch sales have been so bad that Apple isn’t even releasing the device’s sales numbers.
The public wants something new from Apple—something to recapture the sense of wonder that followed the release of the “iPod” and iPhone. In a way, Apple is a victim of its own success and Apple stock is now the barometer of the kind of excitement its products generate.
The Apple Watch just doesn’t create any excitement. Fewer people are wearing watches, though so-called smart or connected watches did surpass the sales of Swiss watches last year. (Source: “It’s Official: Smartwatch Sales Have Exceeded Swiss Watch Sales,” Observer, February 22, 2016.)
However, unlike in the case of the iPhone, which retained a technological edge and aesthetic appeal over its competition for years, the Apple Watch has many rivals. It was the first product launched by the company since Tim Cook took over Apple and its success has become essential as iPhone and “iPad” sales are slowing. So, until the new “iPhone 7” comes out next fall, there’s little to support a major rally in Apple stock.
Could virtual reality come to the rescue? Surely, virtual reality (VR) functionality will become a requisite, as will augmented reality (AR). VR and AR are going to be some of the biggest drivers of tech devices in the next few years. The success of the new AR Pokémon game by Nintendo Co., Ltd (ADR) (OTCMKTS:NTDOY) was such as to drive Nintendo stock flying 30% higher virtually overnight. Likewise, the interest in Sony Corp (ADR)’s (NYSE:SNE) new “PlayStation VR” console has clearly demonstrated the potential of these features in getting consumers excited about a new product.
Last January, Tim Cook hinted that Apple expects VR and AR to be mainstream rather than nice features. (Source: “Apple’s Time Cook on Q1 2016 Results – Earnings Call Transcript,” Seeking Alpha, January 26, 2016.) Apple has not discussed any formal plans in this regard but it does have patents in the field. Namely, Apple has already come up with a head-mounted VR device that works in conjunction with an iPhone. (Source: “Apple Wins Patent for Virtual Reality Goggles,” CNBC, February 18, 2015.)
In 2015, Apple also bought the AR start-up Metaio. It has AR-capable software. This is but one among many related acquisitions by Apple, including Flyby Media. (Source: “Apple Acquires Flyby Media, Makers of Tech That ‘Sees’ the World Around You,” TechCrunch, January 29, 2016.)
So, the bottom line is that Apple knows it needs something big and whatever form it takes, there is a big chance VR and AR will be included to generate the kind of excited buzz that gets people into Apple stores—or rather, lining up outside of them. A VR-ready Apple Watch might certainly help to boost sales.
The takeaway for Apple stock is that investors can take advantage of the current slump and the fact that Apple has come late to the VR party. Investors can be sure that when Apple does offer its VR or AR device, Apple stock is likely to move upward again.