Technology

Apple’s Metaverse Prospects Produce Real Optimism for Investors

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AAPL 0.26%

It may not have caused the current hype around the metaverse, but the company is reaping the benefits.

Excitement about how the iPhone maker could benefit from a broad embrace of alternative digital reality has been a major aspect of the rally in its stock price in recent months, according to investors and analysts.

Apple earlier this month briefly became the first company worth more than $3 trillion in daily trading. Investors and analysts say they are betting that Apple will introduce extended reality devices in the next year or so and open up the potential for a new phase of growth in the coming years.

For its part, the company says little about future plans, although CEO Tim Cook has praised the technology in recent years and said it will be a very important part of Apple’s future.

Interest in metaviruses has gained new momentum since Facebook co-founder Mark Zuckerberg announced on October 28 that he was rebranding his company Meta Platforms. company

To highlight its push to tap into the emerging world of virtual and augmented reality, known as VR and AR. While the Meta share price is up 6.7% since then, Apple’s share price is up 18% to $175.53 on Wednesday.

Analysts believe Apple could expand its ecosystem of hardware, software, and services into the metaverse.


Photo:

Marcio Jose Sanchez/The Associated Press

Longtime Apple analyst Katie Huberty from Morgan Stanley last month raised its target price for the company’s stock to $200 per share from $164 to bake in future value associated with those product lines.

“Price for new product categories should be determined,” she wrote in a note to investors on December 7. “In conversations with project-backed AR/VR companies, the consensus view was that the real catalyst for mass market adoption of augmented/virtual reality will come when Apple enters the market.”

The real meaning so far is mostly hopes and dreams, but proponents say it will eventually be a digital world where people routinely use virtual avatars to work, play, shop and have fun. Analysts believe that Apple can expand its ecosystem of hardware, software, and services into this new world.

Real estate transactions in Metaverse have reached record levels. We spoke with companies investing in digital real estate to understand the economic model, and why investors are spending millions on virtual real estate. Photo: Kingdom of the Republic

Bernstein analyst Tony Sakunagi recently told investors that Apple could ship 22 million augmented reality devices by 2030, which could boost revenue by 4%, and that extended reality devices could account for more than 20% of total revenue by 2040.

Apple is on a collision course with other tech giants to own this newer tech front, renewing old tensions even as the size of the virtual world’s market becomes unclear. Meta has sold VR headsets for years and has aggressive plans to expand, and Microsoft corp.

She sells an AR headset and has talked about her plans for the metaverse.

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Analysts, on average, have boosted their stock price targets for Apple over the past year.


Photo:

Jenna Moon/Bloomberg News

With Apple, some analysts are also looking for the company to make progress on another long-term project, an electric car — even as the company continues to see a turnover of talent within the project.

said Dan Morgan, senior technology-focused portfolio manager at Synovus Trust Co. , of which Apple ranks among its largest holdings “even though these segments are many years away from contributing significantly to Apple’s total revenue.”

The last three months of the calendar year are often a strong quarter for Apple stocks because the company tends to release the latest iPhones in September and enjoy big sales during the holiday shopping season.

But the latest excitement about Apple’s stock is a change from similar periods in previous years because the company reported record results for the fiscal year that ended in September, as its first 5G-capable iPhone lineup drove sales and profits. Apple’s stock performance often turns sluggish after this big year, as investors wait for the next major upgrade to the iPhone.

Instead, Wedbush analyst Dan Ives last month raised his price target to $200 from $185 based on his growing confidence in Apple’s latest smartphone, the iPhone 13 lineup.

Analysts, on average, have boosted their price targets for Apple over the past year. The average target in December of last year was $128 per share, compared to $174.59 on Tuesday, according to FactSet. However, this means that most analysts have priced the stock below its current level.

The emergence of the metaverse could lead to a renewed focus on Apple’s reach. Concerns about Apple’s strength in this new field have been at the heart of a high-profile antitrust lawsuit brought by Epic Games Inc. The manufacturer of Fortnite which has argued that the larger company inappropriately monopolizes software distribution on its iPhones. Epic is concerned that Apple’s rules and commissions will move to a new platform.

High-profile courtroom drama posed one of the biggest threats to the lucrative Apple App Store. After a 16-day trial, a federal judge ruled in September mostly in Apple’s favor, though he ordered the company to stop stopping software makers from telling users within their apps alternative payment methods to get around Apple’s in-app purchase system, which picks up as up to 30% of digital revenue.

On December 8, the US Court of Appeals granted Apple’s request to delay the order, meaning the company could defer any major changes for potential years — another good news for Apple investors.

write to Tim Higgins at Tim.Higgins@WSJ.com

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