After earnings came out last week, markets punished Apple Inc. (NASDAQ:AAPL) stock for…making more money?
The decline in Apple took doesn’t make any sense, especially since Facebook Inc (NASDAQ:FB) got a much warmer reception. Shares soared with the company’s bottom line, a feat that should make Mark Zuckerberg proud. He’s proven himself to be an exceptional CEO, despite his age.
Zuckerberg added new revenue streams that capitalized on Facebook’s 1.5-billion userbase. From “Instant Articles” to its “Oculus Rift” virtual reality (VR) headgear, Facebook kept growing sideways into new industries. For this reason, I get the enthusiasm for Facebook stock.
But why doesn’t Apple get the same type of love? I find that strange, particularly since Tim Cook plans to challenge Facebook on its own turf. He’s been putting a secret team of engineers to work on a virtual reality device.
This could be a huge threat to Facebook’s Oculus Rift.
Apple’s Top Secret Project
A recent report leaked that Apple has accumulated enough talent to build a VR device. The timing couldn’t be better. Facebook just opened pre-orders for Oculus Rift and Sony hasn’t even set a price for its “Morpheus” VR device. It’s not too late for Apple to jump in. (Source: “Apple reportedly has hundreds of people working on a secret virtual reality team,” The Verge, January 29, 2016.)
After all, the era of virtual and augmented reality devices is only just beginning. Some, such as the Oculus Rift, will turn video games and movies into immersive experiences.
Others, such as Microsoft’s “HoloLens,” are more suited to education or design work. This could be multibillion-dollar market that is up for the taking and Tim Cook knows it.
Just look at his comments from last week’s earnings call. A reporter asked him for his opinion on virtual reality technology. His answer was telling:
“I don’t think it’s a niche,” said Cook. “It’s really cool. It has some interesting applications.” (Source: “Apple’s Tim Cook: Virtual reality is ‘really cool’,” CNET, January 26, 2016.)
To my mind, that seems clear. Cook believes the VR market is a potential goldmine, but he can’t say too much in public. Even that minor revelation was out of character, considering how tight-lipped Apple can be.
Apple prefers to hone a product in secret before bringing it to the world. That’s just how the firm operates. I guess we can call it Steve Jobs’ legacy.
There’s no doubt Apple stock is aiming for VR or AR technology, though.
AAPL Stock Forecast for 2016
It lured away VR experts from Microsoft and Lytro. It bought startups like Metaio, Faceshift, Flyby Media, and PrimeSense. These acquisitions would make no sense unless Apple was pursuing its own VR device.
It’s a good thing I don’t own Facebook stock, or else this would terrify me.
Facebook may have 1.5 billion users, but it doesn’t have all those people hooked to a hardware device. Apple could integrate a VR product with “iPhones” and “iPads,” connecting the products in a way Facebook cannot. That’s a pretty attractive proposition.