With the largest market cap in the world at $2.5 trillion and stock growth of 286% in the last five years, Apple (AAPL 0.52%) is an attractive investment. The company is home to a potent brand that amassed immense loyalty from consumers, who have been drawn in by quality products and their interconnectivity, which promotes ease of use.
However, there are positives and negatives for Apple's future. Recent reports have revealed dissent among executives at the company over its planned launch of a virtual/augmented reality (VR/AR) headset, signaling a potential red flag. The question is whether Apple can replicate its past success in entering new markets, which has seen it gain significant share in multiple markets.
Here is one red flag and one green flag for Apple in 2023.
Red flag: Conflict among Apple executives concerning a new product
On March 26, the New York Times reported growing internal skepticism at Apple about the potential success of its VR/AR headset due to launch in June. The device is expected to feature virtual and augmented reality features alongside an iOS-like interface, priced at around $3,000. Critics are reportedly concerned about the hefty price tag and the headset's profitability in an untested industry.
Apple executives aren't the only ones with doubts about the new headset. According to Counterpoint Research, the company is expected to ship fewer than 500,000 units in its first year. Comparatively, the Apple Watches were projected to ship about 40 million units when they were first released.
Much of the skepticism over Apple's venture into mixed reality has come from a lack of clear direction. The company's previous success has come as its devices have offered compelling solutions to consumer problems. The iPod provided a convenient way to store thousands of songs at your fingertips. The iPhone built on that by adding phone, camera, and internet capabilities. However, it's not as easy to understand what issue Apple's VR headset will rectify.
Apple CEO Tim Cook has said of the mixed-reality headset: "You'll wonder how you lived your life without augmented reality, just like today you wonder: How did people like me grow up without the internet?" The executive clearly has big hopes for the coming device. However, if critics' fears come to fruition, Apple's stock could take a downward tumble later this year.
Green flag: Apple has a history of succeeding in new markets
It is still early days for mixed-reality markets, but Apple's past performance when entering new industries suggests it has a better chance than anyone at succeeding in VR/AR. When releasing brand-new products, the company often garnered criticism from those who didn't quite see Apple's long-term vision.
Former Microsoft CEO Steve Ballmer infamously condemned the first iPhone for its price and said: "It doesn't appeal to business customers because it doesn't have a keyboard. Which makes it not a very good email machine." Meanwhile, the iPhone now has a leading 24.1% market share in smartphones, earning $205.5 billion in revenue in fiscal 2022.
The first iPad was similarly criticized, called "just a big iPod Touch" by PCWorld in 2010. However, its success skyrocketed the mass adoption of tablets, with Apple currently holding a 49.2% share in the industry.
The company's more recent ventures into new markets have seen it quickly rise to a position of dominance. Apple launched its first generation AirPods in 2016. By 2019, Fortune reported that the headphones' $8 billion in revenue alone would rank the business No. 384 in the Fortune 500, ahead of Foot Locker, Motorola, and Advanced Micro Devices at the time. Then in 2021, Apple hit a leading 34.4% market share in headphones.
The tech giant has also achieved the most market share in smartwatches at 26% after releasing its first Apple Watch in 2015.
Is Apple stock a buy?
Since the first commercial VR headset, the SEGA VR, launched in 1993, mixed reality devices have primarily focused on gaming. However, Apple's coming AR/VR machine is reportedly aiming to enhance various professional fields in business and art design. In addition, some reports say the company eventually hopes to completely replace the iPhone with a future iteration. The claims feel far-reaching for now, but Apple's past suggests it could prompt a surge in consumer adoption of mixed reality technology over the long term.
If Apple's vision becomes a reality, investing in its stock now could be akin to investing before it released the first iPhone. The stock has seen its shares rise 4,600% since 2007.
However, Apple's stock is a buy regardless of how its mixed reality headset performs this year. It offers consistent and reliable gains over the long term. Over the past decade, the company's shares have risen 900%, with the potency of its brand and current products likely to keep it growing for years.
In this case, the green flag outweighs the red, with Apple's stock an excellent buy in 2023.
