Can Apple's Rally Continue With Vision Pro's 'Drastic' Production Cuts?
$Apple(AAPL.US$ is slashing production targets for its Vision Pro headset because manufacturers are struggling with the novel gadget's complex design, the Financial Times reported.
According to anonymous sources familiar with Apple and Chinese manufacturer Luxshare Precision Industry Co., which is handling initial assembly, the tech giant is preparing to produce fewer than 400,000 units of its $3,499 Vision Pro headset in 2024. Two China-based component suppliers noted that Apple has only requested enough parts for between 130,000 and 150,000 units in the first year. Additionally, plans to introduce a more affordable version of the product have been delayed.
The news isn't surprising to us, as it's a first-generation product. Our original thesis called for only 500,000 units in the first year (half Apple's original expectation) given the headset's $3,500 price tag. We don't expect the product to have significant financial impact for the next three years." - Bloomberg Intelligence analysts Anurag Rana and Andrew Girard said in a note.
Apple has recently launched its latest product, the Vision Pro, in an effort to maintain sales momentum and boost the mixed-reality industry that has struggled to gain mainstream acceptance for years. The device, which is designed like advanced ski goggles, is equipped with visionOS, a proprietary operating system, and a dedicated App Store. It is scheduled to debut in the US early next year and eventually expand to other regions.
Worldwide shipments of VR headsets and augmented reality devices dropped by more than 12% to 9.6 million in 2022, according to CCS Insight. Less than a year since augmented reality glasses startup Xreal started sales, the $Alibaba(BABA.US$ -backed company is claiming shipments will soon reach 200,000 units. Xreal's Air glasses cost $379, about a tenth of the $3,500 that Apple plans to charge for its Vision Pro headset when it's set to reach consumers next year. The two products operate on different technology and their capabilities vary.
Apple recently made Wall Street history after its market value climbed past $3 trillion, as investors continued to pile into big tech firms.
$Citigroup(C.US$'s Citi Research weighed in late Thursday with a vote of confidence in the stock's ability to run ever higher from here, with analyst Atif Malik initiating coverage of the shares with a buy rating and $240 target price.
We believe the Street is underestimating continued gross margin expansion," Malik wrote in his note to clients, while adding that he anticipates the "trend of premium iPhones grabbing more share to continue."
Wedbush analyst Daniel Ives chimed in that Apple shares could come to fetch a higher multiple as the company nears $100 billion in annual services revenue for fiscal 2024, compared with about $50 billion in fiscal 2020. Ives said he thinks a fair valuation for Apple would be about $3.5 trillion by fiscal 2025, though his bull case contemplates the potential for a $4 trillion valuation by that point.
However, according to $UBS Group(UBS.US$ analyst David Vogt, demand for Apple's iPhone is still lackluster and may fall short of projections. In May, iPhone sell-through totaled 14.5 million units, marking a 2% YoY decline that outperformed the market's 8% drop. Quarter-to-date, iPhone sell-through decreased by more than 3%, possibly causing Apple's June quarter unit sell-in to fall 3% below consensus estimates. The 14.5 million iPhones sold in May represented the lowest monthly sales since August 2022, a period that typically experiences subdued demand as customers await the new iPhone model's September release. Despite the weak demand for iPhones, global smartphone demand remains tepid. UBS maintains a Neutral rating on Apple and a price target of $190.
Mooers, do you think Apple's rally can continue with Vision Pro's 'drastic' production cuts?
Source: Financial Times, Yahoo Finance, CNBC, The Fly, Dow Jones, Statista
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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warmhearted Puppy_93 : No!