Apple and Meta are banking on virtual reality technology as the next big thing in consumer electronics, but the jury is still out on which company has the right strategy. Apple’s recent announcement of its Vision Pro headset, priced at $3,499, comes at a time of seemingly cooling enthusiasm for the “metaverse” — a virtual reality space where users can interact with a computer-generated environment and other users. While the price tag has also drawn its fair share of criticism, Andrew Uerkwitz, an equity analyst at Jefferies, does not see Apple’s hefty sum as a misstep. He told CNBC’s “Tale of the Tape” that the superior technology of the Vision Pro compared to other virtual reality and augmented reality headsets justifies its high price. “The technology blows anything that we’ve ever seen. It’s a well-deserved price point,” he said, while acknowledging that the initial price might deter some potential buyers. When asked about Meta’s strategy and whether the $299 Quest could compete with Apple’s Vision Pro, he said that the two companies are pursuing different approaches. He sees Apple trying to redefine the headset as a personal computing device, using terms like “spatial computing” and “personal computing” in its presentations. By contrast, Meta is marketing their headset primarily as an entertainment product. To Uerkwitz, this positioning by Apple is strategic — by portraying the Vision Pro as a computing product, potential buyers might compare its price to a Mac Pro, rather than to the less expensive Quest. Despite the excitement surrounding Apple’s Vision Pro, other analysts have urged caution . UBS downgraded Apple shares to “Neutral” (or hold) due to softer iPhone and services growth and indicated that Vision Pro will likely ship fewer than 1 million units in 2024 because of supply chain constraints. “Although we have not explicitly embedded the Vision Pro in our forecast, we believe supply could be limited to ~750,000 units,” said UBS analysts led by David Vogt in a note to clients on June 12. “In addition, our checks indicate the device likely has contribution margins around 40+% implying the device could add 5 cents to [earnings per share] or a lift of 80 [basis points] to growth, not enough to move the needle with Apple shares trading at almost 30x.” AAPL META 1Y line Expected to hit the market in 2024, Apple’s Vision Pro allows users to interact with content and popular iPhone apps without a controller. Although the Vision Pro is unlikely to produce tens of billions in sales immediately, Uerkwitz remains optimistic about the device’s value creation over the long run. Uerkwitz pointed to Apple’s past product launches, namely the iPhone and the Apple Watch, which took time to discover their primary use and appeal to the broader public. When the iPhone was first announced, it was perceived as a phone, a music player, and a miniaturized internet browser. Thirteen years later, it’s now a do-it-all device, primarily due to the diverse app ecosystem that shaped over time. Similarly, the Apple Watch initially debuted as a luxury wrist accessory, but has since evolved into a health-oriented device. “You look at the watch, they originally tried to position this as a luxury watch item… And ultimately, it sells more devices than all of Switzerland,” Uerkwitz added. According to the Jefferies analyst, by collaborating with Unity, a game engine that supports the creation of real-time 3D content, Apple is setting the stage for developers to dictate the Vision Pro headset’s ultimate use cases. Tom Forte, equity analyst at DA Davidson, also voiced skepticism about consumer adoption of the new VR tech, primarily because of its high price point. “While we believe Apple’s meaningful entry into VR hardware should serve as a catalyst for adoption, important structural challenges remain,” Forte noted. Instead, the DA Davidson analysts see Meta gaining from Apple’s announcement. “In our view, Meta Platforms stands to benefit from Apple driving consumer adoption and because it offers hardware at much lower prices,” Forte said, referring to Meta Quest 3, the VR headset from Meta Platforms, which launched at $499 earlier this month with a target date this fall. — CNBC’s Michael Bloom contributed to this report.
