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As Apple. (NASDAQ:AAPL) returns to more normal valuation multiples, investors should be aware that this equation still does not provide extraordinary returns over the long term.the tech giant After recently encountering demand issues and following several years of strong covid boosts and struggling major moonshot projects, it’s finally here. investment paper Apple Inc. stock remains bearish and the dead money theory is now in full force.
Source: FinViz
Further moonshot delay
A large part of Apple’s dead-money call was its reliance on new advertised products to boost its stock price. The Apple Car and AR/VR headsets were big factors pushing the stock above $160, and those products weren’t set up to bring much revenue to the tech giant. years to come.
The news around AR/VR devices helped the dead money call a lot. The mixed reality device, long speculated to cost over $3,000, has yet to be released, but the Apple Car continues to scale back Push delivery data.
Latest news from bloomberg There is a full schedule for AR/VR devices further delayed, AR Glasses has been postponed indefinitely due to technical issues. A low-end MR device he may not hit the market until 2025, leaving a huge void until a second model hits the market up to two years after the release of the high-end MR device this year.
The problem facing Apple is the initial cost of the MR device, possibly dubbed the “Reality Pro,” expected to be released this year. In fact, the tech giant doesn’t seem to have a competing product. meta platform (meta) probably a pro device by 2025.
Apple now has the 10 cameras, sensors, and multiple chips needed to build an MR device. The company uses cheap iPhone-related products and chips in its low-end devices to push prices down, but this product may not hit the market in a few years. Meta has since released a new version and established a strong roadmap in VR. sector.
The revenue potential for the AR/VR device category over the next 2-3 years looks very limited. The Apple Car is already he predicted as a product for 2026, and the limited details give us confidence that the tech giant can develop a product in this space soon.
AR glasses are the most promising device Apple could replace the bulky iPhone with a device that provides a display that replaces most of the smartphone’s functionality. So it seems that there is no concrete plan for this device. This VR device lags far behind Meta’s Oculus product, which has been on the market since 2016. Original Oculus Rift.
According to data from IDCthe AR/VR market struggled in 2022, with sales declining as Meta released only the $1,500 Pro model this year. Not supporting demand, shipments fell an estimated 12.8% last year to 9.7 million units.
of Moonshot definition It has changed over time, Merriam-Webster defines the original “long shot” as follows:
A project or venture aimed at producing profound or noticeable results after a heavy, consistent, and usually quick push.
AR/VR devices and the Apple Car definitely fall into the category of moonshot possibilities. By entering a new category, Apple hopes to produce profound results.
Unfortunately, products from both categories are still not available for sale. Even Evercore ISI analysts believe that large-scale AR/VR products $18 billion in sales And an almost meaningless EPS of $0.19.
AR glasses could replace the iPhone over time, giving Apple a game-changing product. The tech giant is well on his way to reaching his $400 billion in annual sales, so any product with less than 5% of his sales can’t be called a moonshot.
back to trends
The chart below highlights the problem with Apple trading future profit expectations of more than 30x in early 2022. The tech giant doesn’t have a history of growth that warrants high multiples.
Aside from a significant increase in sales in 2021 due to the new coronavirus, Apple has had modest growth for at least five of the past seven years. The current consensus forecast is just 2.5% revenue growth in FY23.
Earlier in January, Apple reportedly cut order MacBooks, Apple Watches and AirPods are the inside out signs of a big coronavirus boost for 2021. An unnamed Apple supplier has suggested that lower-than-expected demand is partly to blame for the problem.
The tech giant faced a tough time at the end of 2022 with a shortage of iPhone 14 supplies as Foxconn faced a covid shutdown in China. However, the company has faced wrath from the Communist government for falling short of its sales in China.
Apple Inc.’s stock price recovered to $135, putting valuations in a stretched position again given all the production and demand issues and the failure of both major moonshots. Analysts now expect earnings to rebound next year, but Apple Inc.’s stock still trades at his FY24 EPS target of 20x, suggesting limited two-year growth. Predicted.
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The key takeaway from investors is that Apple Inc. needs a massive moonshot project to pay off. The AR/VR category’s constant lag doesn’t give confidence that the product will successfully drive enough earnings to justify a stock price increase.
Apple Inc. will continue to sell until the valuation formula changes due to a decline in the stock price or the moonshot project succeeds.