It finally happened: After years of rumors, Apple (AAPL 1.27%) unveiled what it calls the Apple Vision Pro, arguably the company's most ambitious product since the iPhone transformed it into the multitrillion-dollar goliath it is today.
Just as the Vision Pro aims to immerse users in the digital world like nothing has before, investors are hoping that the product can launch Apple into a new age beyond the iPhone.
Apple's loaded reveal, which included a tie-up with Disney and an appearance from CEO Bob Iger, signaled just how high the company believes the stakes are here.
Unfortunately, one potential mistake could pose a significant problem for Apple. Here is what you need to know.
The Vision Pro finally arrived, and Apple went big
Apple unveiled the Vision Pro at its annual Worldwide Developers Conference. The Vision Pro reflects the company's emphasis on quality, features, and premium materials. The headset features 4K resolution, technology to control it with gestures (no handheld remotes), and a transparent display that blends the digital and real worlds. Users can see the world around them in full color, and the Vision Pro projects 3D objects into their field of view.
But Apple's secret sauce has always been its developer support, software, and ecosystem, where it shines again. Users can do various activities through their Vision Pro, such as make video calls, view streaming media, and play games. It even announced a partnership with Disney to deliver premium content for the device's users.
The Vision Pro has an approximately two-hour battery life and is powered by an external battery pack that users can put into their pockets. Power connects to the headset via a single cable that plugs into the back of the device.
But there's one big problem...
Most might agree that the Vision Pro is impressive, even if some might not like certain features, such as an external battery. But the biggest issue with the Vision Pro is likely its price tag. Apple said that the product will start at $3,499, available next year. One could argue this is a hefty price tag for a first-generation device like this, especially in a still-nascent industry like augmented reality, though cutting-edge tech is rarely cheap.
The cost does warrant discussion from a competitive angle. For starters, it prices the Vision Pro entirely above Meta Platforms' announced Quest 3 headset, which will sell for $499.99, or one-seventh the price, if you're keeping track. Again, that's the starting price.
Apple is a beloved brand, but everyone has limits. Why does Tesla's Model 3 and Model Y outsell the Model S and X by a wide margin? Because people don't always want the best money can buy; they want value ... bang for their buck.
Apple's Vision Pro will probably do more than even the Quest 3 (full details haven't come out from Meta Platforms yet), but it might not matter. Consumers might decide that having something 75% as capable for a far lower price is good enough.
Meta Platforms hit the market first and has built an 80% global market share with its Meta/Oculus brand. Apple is pricing its product as if the average consumer -- who is dealing with inflation, resuming student loan payments, and soaring housing costs -- will happily shell out $3,500 or more.
I could be wrong, but I'm struggling to see who will buy this outside of dedicated, high-income customers. It felt like Apple was aiming higher with the Vision Pro than having it be a niche product.
What should investors do with Apple stock?
The Vision Pro won't come out until 2024, but the recent hype around its reveal could have played a role in Apple stock's stellar run. Today, shares are near all-time highs and up 38% since January -- an impressive leap for a multitrillion-dollar stock.
That's excellent news for those holding shares and unfortunate for those looking in from the outside. The stock's valuation has floated to a price-to-earnings ratio (P/E) higher than 30, roughly 50% above the stock's average over the past decade.
Apple probably needs the Vision Pro to be a game-changer to generate growth that could justify this valuation. As it is, analysts believe the company will grow earnings by an average of 12% annually over the next several years.
That might not cut it, which makes the stock one to avoid right now. Apple's new Vision Pro might be a fantastic product, but it doesn't seem like the transformative iPhone moment investors were looking for.
