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Apple has just released its augmented reality headset and the public reaction has been very mixed.

Some reviews are very optimistic and some believe it will be a flop. Almost no review is extremely optimistic.

I seem to be more optimistic than anyone from the perspective of how this impacts Apple, the company.

Financial times are calling out 1 million units of sales in 2024 which would be a rounding error even with the $3500 price. This would be only $3.5 billion against their earnings of nearly $100 billion.

I think the product is being grossly underrated. I view it as the most important announcement by Apple has made since the original iPhone.

The hardware and software technology is exceedingly ahead of the competition.

Keeping it social, by having the eyes projected to the front, was a crucial move. (They want a systemic effect, even if some individuals don't want people to see their eyes.)

I think the financial strategy of releasing a fully fledged version from the start, which costs them a huge amount of money to put together, was extremely insightful. It eliminates the competition because they cannot answer, without directly copying as Samsung did when the iPhone came out, but the lead time for copies will be larger than it was for the iPhone.

Developers are now drooling and can then imagine, and start to produce as I type, their apps with the broadest scope. By release time in 2024 they will have both the apps and hardware and have a huge lead. Again, the competition will fall out of the app development moat.

The price will come down but I also expect there to be even higher priced models reaching $5,000.

Apple are right to permit margins right at the start. Their production cost is gigantic. This is sort of the opposite of Coke's method of pricing so low that competitors are thrown out. In this case the hardware and software standard is so high that competitors are thrown out. Competitors can only produce hacked lower grade copies - for the software is notoriously difficult to replicate, and unlike with the early iPhone release there is a lot of substance in their custom chips this time.

I also think far more people will buy this at $3,500 than what observers currently believe. When there is no alternative, people can pay up surprisingly high.

Any number I throw up is only a guess however I think 1 million units in 2024 is a low figure. 250 million iPhone sales are sold each year.

To remind: The price is almost a magnitude higher than iPhones so they can have a magnitude fewer sales and still double their earnings. 25 million sales would be required to double their earnings, but I think this will happen after several years.

As investors we don't care what is sold next year but what is sold in ten years, and in 20 years.

The large number of people in stores wanting to try them on even without buying will also result in a (one or two year) uptick in iPhone sales; though that effect is of course temporary.

I have an composite theory as to why Apple will have higher earnings on a *sustained* basis, though, after this announcement and it may take a while to articulate. It relates to the magnitude of technology involved being particularly high; and unable to be simplified for the unified effect of how it all works together. This produces a very high production hurdle for competitors, so purely on the basis of production cost the product of this type will *remain in a much higher price* range than the iPhone.

People will buy it, including a large proportion of those mocking it right now.

Sadly Apple is now being quoted at almost historically high margins (it surpassed these margins only briefly around 2012) and on top of that a PE at a long-term high also. When you combine these two, you have a recipe for serious stock price falls with both margins mean reverting 30% down and the PE falling 30% back to 20, resulting in a quotation fall of 1-.7*.7 which is about 50% lower.

This sanity check enormously counterweights my expectation for much higher earnings in 2024, even if durably so as I predict. The earnings could simply 'grow into' the stock price so it would no longer be expensive.

On the other hand the past valuations were perpetually too low since 2009, given the earnings growth that ensued.

Investing never seems easy. But why should it be.

In any case my IV10 for Apple has increased by almost a factor of 2 over my prior IV10 figure, after this announcement. I'm referring to earnings in 2033, not next year. In other words, my expectation for earnings ten years away is double what I anticipated only one year ago.

That sounds unreasonable and rarely happens but I have been thinking about this new hardware paradigm very carefully. It is very big.

The form factor is goofy. It is presently completely unproven whether masses will wear this, as they use an iPhone.

But the form will improve a lot more than the iPhone form changed over the years.

From an investing perspective, Apple is substantially more of a software company although the attention is on the (also excellent) hardware. In design the two are very unified, but I have always viewed their competitive moat as largely in the software. It is much harder to catch up to their large software advantages than it is to catch up with their hardware.

- Manlobbi

It is Apple's fiduciary duty to wring the maximum profit from its recession-proof cult base.
They are still waiting for a car so they can ditch the Tesla.

I believe Apple, Google and Meta and many others visualize a very near future where augmented reality has the potential to be a much more significant impact than the personal computer or the cell phone were in the past. Ironically the very large market for video games has been the prime economic driver for more powerful computers, parallel processing with the development of GPUs. But the overall impact of the technology is already changing everything from the movies we watch, the design tools for engineers, video conferencing, video courseware. . . The $3500 initial price isn't all that out of the ordinary for a new innovation.
Especially when considering how initially expensive technology introduced in the past can be significantly less expensive over time. Color TV's initially sold at around $500 in 1964 which is close to $5,000 in todays dollars. If Matthew Ball's book 'The Meta-Verse and how it will Revolutionize Everything' is even slightly predictive Apple is on the right tract. This version of the headset with the currently available software is just one important step forward.

RAMc

I think we will see these goggles merge with the iPhone.

Once they are much lighter with a day long battery life and iPhone functionality, there will no need to have both.

Imagine a light set of goggles that could display apps anywhere, function as readers, sunglasses, etc.

Probably take 5-10 years.

VR will truly take off when the headset comes close to as light and small as a sunglass. I think it's at least 5 years away.

VR will truly take off when the headset comes close to as light and small as a sunglass. I think it's at least 5 years away.

I agree it will definitely take at least 5 years before the public truly catch on, however I would not be surprised if it does not become greatly lighter as forecast by everyone. The iPhone was seen as fairly bulky but we became used to it and continued to want the latest CPU, storage and longer battery life.

The main problem for a year or two won't be lack of demand but rather the lack of manufacturing capacity. Particularly the display.

Contrasting my earlier expectations for more than 1 million units in 2024 in demand, that probably won't be possible id only for the Sony supplied screens stuck at about 900,000 per year:

https://www.thelec.net/news/articleView.html?idxno...

Remember the first year of the IPhone how difficult it was to get one with the limited supply. It created a good image, and we might have much of that phenomenon next year.

We might need to wait until about 2027 for the signifiant sales numbers, at which time the new app visionOS ecosystem will he starting to mature. 50 million units (one fifth the units of iPhones being sold now on trend) by 2028 wouldn't at all surprise me, and the price averaging perhaps around $2,500 but high end versions remaining over $5,000.

I obviously can't predict the future but it is still sane to to play with some numbers if only for some proportionality for how the product will effect Apple's earnings. 50 million units in 2028 at $2500 and a 40% gross margin would bring about $50 billion in earnings. It might take longer than 2028 but at some point I imagine one fifth of iphone buyers will want to use spacial computing even if only occasionally. Apple's advertising expense, on top of their software quality, will almost ensure it.

With the present approx $90 billion in earnings, an extra $50 doesn't quite double, however by 2033 more again will be using spacial computing. It will move to a double, and I don't think iPhone sales will slow down much, if at all.

The film industry I anticipate to reorient to releasing significantly more titles in 3D much, and demand for Apple services will likewise continue to rise.

It would make enormous sense for Apple to allow a movie screen to be shared with everyone nearby, at which time, if they agree, it appears in their view at the same room position. This would allow film to be watched together and enormously raise the value of the experience not to mention make the world psychologically less odd than it otherwise would be. This projected screen sharing idea (with fixed room position) has not been mentioned anywhere thus far to my knowledge, so if anyone at Apple is reading this, please pass this idea the the visionOS team.

- Manlobbi

Manlobbi wrote: I agree it will definitely take at least 5 years before the public truly catch on, however I would not be surprised if it does not become greatly lighter as forecast by everyone. The iPhone was seen as fairly bulky but we became used to it and continued to want the latest CPU, storage and longer battery life.

I agree with the prior comment that the headsets will need to become significantly smaller/lighter to take off. It's true that the iPhone has maintained it's bulk, or gotten even bigger for some models, but that added size includes tasty added functionality: a bigger screen is much easier and better to watch video on, and multiple high quality cameras with the storage and computing capacity to capture incredible photos and video is also highly popular. But, every iPhone can still be slipped into your pocket when not in use, out of sight. The headsets on the other hand are strapped onto your face, and I believe they'll have to become much smaller, lighter and more attractive for people to want to wear them on a regular basis, especially if they are to become something that is used in public.

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