Morgan Stanley dubs Apple Vision Pro a 'free call option on spatial computing'

Posted:
in Apple Vision Pro edited February 6

Wowed by their experience with Apple Vision Pro, analysts at investment bank Morgan Stanley see "immense" long-term potential for the Spatial Computing headset that Wall Street has yet to fully appreciate.

Apple Vision Pro in an Apple Store.
Apple Vision Pro in an Apple Store.



In its first weekend of availability, the Apple Vision Pro received considerable interest from early adopters and industry observers alike. Among them were members of Morgan Stanley's AAPL equity research team who spent a full three days immersed in device's world of spatial computing, having an eye-opening experience that left them jazzed up about its future.

"The long-term potential of the Vision Pro is immense, and against low investor expectations," analyst Erik Woodring said, adding that the success of the device and its successors are "effectively a free call option on Apple innovation."



In particular, the analyst is bullish on the Vision Pro's prospects to mature into a desirable productivity tool for consumers while serving a variety of interest within the enterprise, such as remote training, digital showrooms and in-field remote repairs. Others have lauded potential use cases in surgical, construction and industrial applications.

For the time being, Woodring sees content consumption serving as the Vision Pro's "killer app." He was duly impressed by the clarity and sharpness of its dual displays, which are "incredible" and make you feel like you are have teleported yourself into the environment you're watching.

"It's an entirely new way of consuming content, and is as close to the 'real world' as you can get without physically being there," he said.

In general, his team found experiences of roughly 30 minutes in a mixed-reality setting to be most preferable. Ultimately, he sees the device emerging as a "content powerhouse" with the advent of live sports, graphic-intensive flicks, and mixed-reality games on its platform.

At $3,500 plus tax, Apple Vision Pro certainly isn't for everyone. It's not sharable, has some pixelation issues around the periphery, and will require a physical Bluetooth keyboard to actually be productive in its current incarnation.

Woodring expects these limitations to be addressed as the product matures, believing there's "immense" potential for upside surprise to Apple's bottom line over next three to five years.

Morgan Stanley reiterated its overweight rating and $220 price target on shares of AAPL. The stock is up a fraction of a percent to $188.32 in afternoon trading on the NASDAQ.



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Comments

  • Reply 1 of 21
    omasouomasou Posts: 573member
    What is going on with the world?

    I have NEVER seen as many journalists, reviewers, etc. focus on the positives and potentials of an Apple product!

    Instead of the norm reporting that focus on the negatives and how the product is a failure. This time they explicitly stating they instead understand that this is a Gen 1 product and that the negatives will eventually be resolved going forward.
    badmonkAfarstarroundaboutnowam8449jas99watto_cobrajony0
  • Reply 2 of 21
    nubusnubus Posts: 384member
    omasou said:
    I have NEVER seen as many journalists, reviewers, etc. focus on the positives and potentials of an Apple product!

    Instead of the norm reporting that focus on the negatives and how the product is a failure. This time they explicitly stating they instead understand that this is a Gen 1 product and that the negatives will eventually be resolved going forward.
    They are scared of getting it wrong. No, they don't understand that it is Gen 1, and you're wrong if you believe all Gen 1 products do become a success - Newton, Segway, iPod Hi-Fi, New Coke, and so many more. Some got several revisions but still failed.  https://museumoffailure.com/ 


    williamlondondesignr
  • Reply 3 of 21
    $4B is way too conservative. If the number of 200K units are ti be believed that’s close to a billion already after it’s just launched in one country 
    jas99watto_cobra
  • Reply 4 of 21
    jimh2jimh2 Posts: 617member
    Some seriously smart people at Morgan Stanley: High price, anemic app selection, made not to be shared, GEN2 will be better. I would never trust their judgement on anything if this is the best they have to offer in terms of commentary.

    I would not allow myself to be quoted saying what is obvious about most every product made.
    edited February 6
  • Reply 5 of 21
    thttht Posts: 5,444member
    Morgan Stanley currently forecasts that Apple's headset business will "conservatively" ramp up to $4 billion per year in revenue after four years. In theory, this would be below the product ramps of the Apple Watch and AirPods in their post-launch timings.
    $4b per year is 1.1m units at $3500 in the 4th year of sales? Yeah, conservative. They may be able to do that in year 2 or year 3.

    As a contrast, Meta's Reality Labs division has never made $4b per year. Here's Reality Labs' financial performance:


    This is amazing, and speaks to Zuckerberg's absolutely control of Meta. That operating loss line continues to scale with the revenue line. This implies that if Meta sells more Quest units, they will have more operating losses. IOW, for every Quest sale they have at $500, they lose about $2500.

    A normal CEO would have stopped this a year ago, at least. That loss line has to stop getter bigger. There has to be projections in Meta when the Quest ecosystem can pay for itself, and it looks very far away. 

    Would be interesting to see what the AVP financials are like.
    jas99Alex_VBart Ywatto_cobra
  • Reply 6 of 21
    22july201322july2013 Posts: 3,572member
    Will Apple Vision Pro sales figures be camouflaged under "mobile computing" in Apple's quarterly report?
    watto_cobra
  • Reply 7 of 21
    jimh2jimh2 Posts: 617member
    tht said:
    Morgan Stanley currently forecasts that Apple's headset business will "conservatively" ramp up to $4 billion per year in revenue after four years. In theory, this would be below the product ramps of the Apple Watch and AirPods in their post-launch timings.
    $4b per year is 1.1m units at $3500 in the 4th year of sales? Yeah, conservative. They may be able to do that in year 2 or year 3.

    As a contrast, Meta's Reality Labs division has never made $4b per year. Here's Reality Labs' financial performance:


    This is amazing, and speaks to Zuckerberg's absolutely control of Meta. That operating loss line continues to scale with the revenue line. This implies that if Meta sells more Quest units, they will have more operating losses. IOW, for every Quest sale they have at $500, they lose about $2500.

    A normal CEO would have stopped this a year ago, at least. That loss line has to stop getter bigger. There has to be projections in Meta when the Quest ecosystem can pay for itself, and it looks very far away. 

    Would be interesting to see what the AVP financials are like.
    Meta’s business model is tried and true, all but give something away at a loss hoping it will catch on and volume will make up the difference as the cost to manufacture decreases. It is a successful business model for entering an evolving field or taking out existing companies. Apple has never played that game which is why their early products are expensive and are substantially more developed at launch. 
    jas99Bart Ywatto_cobra
  • Reply 8 of 21
    tht said:

    This is amazing, and speaks to Zuckerberg's absolutely control of Meta. That operating loss line continues to scale with the revenue line. This implies that if Meta sells more Quest units, they will have more operating losses. IOW, for every Quest sale they have at $500, they lose about $2500.

    A normal CEO would have stopped this a year ago, at least. That loss line has to stop getter bigger. There has to be projections in Meta when the Quest ecosystem can pay for itself, and it looks very far away. 

    Would be interesting to see what the AVP financials are like.
    Not defending Meta, but I guess he is taking the Video Game Console sales approach. Console are sold for a huge loss (maybe not as big as Quest), so they can make it back up on software. I don't think Quest has any killer apps that will make up for the loss of the hardware sale. I guess he is just trying to get the install base.
    watto_cobra
  • Reply 9 of 21
    I find that moniker funny.
    watto_cobra
  • Reply 10 of 21
    thttht Posts: 5,444member
    tht said:

    This is amazing, and speaks to Zuckerberg's absolutely control of Meta. That operating loss line continues to scale with the revenue line. This implies that if Meta sells more Quest units, they will have more operating losses. IOW, for every Quest sale they have at $500, they lose about $2500.

    A normal CEO would have stopped this a year ago, at least. That loss line has to stop getter bigger. There has to be projections in Meta when the Quest ecosystem can pay for itself, and it looks very far away. 

    Would be interesting to see what the AVP financials are like.
    Not defending Meta, but I guess he is taking the Video Game Console sales approach. Console are sold for a huge loss (maybe not as big as Quest), so they can make it back up on software. I don't think Quest has any killer apps that will make up for the loss of the hardware sale. I guess he is just trying to get the install base.
    Sony's PlayStation hardware is profitable within about 6 months of sales. Nintendo's hardware is sold for a profit from the start. Microsoft's Xbox hardware is apparently not profitable so they testify. If Sony is profitable with their hardware, it basically means MS is incompetent with their hardware management as PS and XBox hardware is about 95% the same. I don't think selling loss leader hardware is really MS's goal. They just never have been good at managing it like Sony is.

    All 3 companies then make a lot of revenue and more profit as a cut of game and digital goods sales on their respective platforms have like 90% margins. The revenue from both hardware and software is then enough to pay for development of the next versions of the hardware and software. All 3 companies make profits from their gaming divisions.

    Meta is not using the game console strategy as the game console vendors don't sell their hardware as loss leaders. What Meta is doing is dumping hardware onto the market, buying out all the developers and publishers, and choking out any competitors. Then some time in the future, there will be enough users to monetize. Lots of question marks on that.

    Is there a path for Meta's headset software to make enough revenue to pay off hardware loss and R&D? I don't think they know. The plot of Meta Reality Labs' financial doesn't show a bend in the curve for losses, so they are not making enough money on software to dent the hardware and R&D spend yet. For 2023, Meta Reality Labs has an operating loss of $16b. 16 billion dollars. What are they spending the money on?
    MustSeeUHDTVBart Ywatto_cobra
  • Reply 11 of 21
    Will Apple Vision Pro sales figures be camouflaged under "mobile computing" in Apple's quarterly report?
    Wearable and Home. I wouldn’t call it camouflage, given that it’s worn the wearables seems like the correct place for it. 
    jas99Bart Ywatto_cobra
  • Reply 12 of 21
    Priaptor1Priaptor1 Posts: 5unconfirmed, member
    Those who don't own one, can make their own conclusions, but I own one and can say, for certain things it is a game changer.  How those things progress we will see.

    Watching videos, movies, streaming (for things covered) it is fantastic.  Better than any TV I have ever owned.  For immersive and 3D it is amazing.  

    For games, we will see.  I am not a gamer BUT have played some VR on a Meta and don't see, with this technology Apple approaching that experience but it is early. 

    As a spatial computer, until Apple gets this typing nonsense down, no way.  It took me 10 minutes to get a password into Disney.  This is a nightmare. If you need to use a physical keyboard this is a non-starter.  This needs a complete revamping as this sucks. 

    Scrolling, setting up windows and the whole experience is pretty good. 

    So, while early on, there are some big hits, there are some serious flaws especially in the computing aspect of the device, particularly the virtual keyboard that needs some major changes. 
    amarkapmuthuk_vanalingamMacProAlex_Vwatto_cobra
  • Reply 13 of 21
    XedXed Posts: 2,559member
    tht said:
    Morgan Stanley currently forecasts that Apple's headset business will "conservatively" ramp up to $4 billion per year in revenue after four years. In theory, this would be below the product ramps of the Apple Watch and AirPods in their post-launch timings.
    $4b per year is 1.1m units at $3500 in the 4th year of sales? Yeah, conservative. They may be able to do that in year 2 or year 3.

    As a contrast, Meta's Reality Labs division has never made $4b per year. Here's Reality Labs' financial performance:


    This is amazing, and speaks to Zuckerberg's absolutely control of Meta. That operating loss line continues to scale with the revenue line. This implies that if Meta sells more Quest units, they will have more operating losses. IOW, for every Quest sale they have at $500, they lose about $2500.

    A normal CEO would have stopped this a year ago, at least. That loss line has to stop getter bigger. There has to be projections in Meta when the Quest ecosystem can pay for itself, and it looks very far away. 

    Would be interesting to see what the AVP financials are like.
    AVP in the market will help Quest (and others) sell more units. Apple has brought legitimacy to the VR market. You can look at Blackberry's sales after the iPhone was announced to see how that worked out for Blackberry nee RiM in the short and long term. Maybe Meta will figure out how to hold their own in the market since this isn't Meta's main product/service, unless Blackberry. I guess we'll see in a few years.
    watto_cobra
  • Reply 14 of 21
    dewmedewme Posts: 5,368member
    The Vision Pro has amazing future potential, but even Morgan Stanley is hedging their bets when comes to when the Vision Pro will deliver on its promises. 

    “ … there's "immense" potential for upside surprise to Apple's bottom line over next three to five years.

    So, what’s the compelling reason to jump on board the Vision Pro train prior to when it really starts to deliver on some of these greater promises? 

    How many other Apple version 1.0 products held up favorably against their version 2, version 3, etc., versions? What’s the expected lifetime of a version 1.x Vision Pro? Apple has a way of ramping up the capability of the first 3-4 versions of a product before the deltas start to become smaller and smaller. 

    I think the current Vision Pro is an amazing achievement, but so many professional reviews seem to be talking too much about it will do in the future and not talking enough about what it delivers now or even near term. 
    watto_cobra
  • Reply 15 of 21
    am8449am8449 Posts: 392member
    omasou said:
    What is going on with the world?

    I have NEVER seen as many journalists, reviewers, etc. focus on the positives and potentials of an Apple product!

    Instead of the norm reporting that focus on the negatives and how the product is a failure. This time they explicitly stating they instead understand that this is a Gen 1 product and that the negatives will eventually be resolved going forward.
    I feel the same way. I can’t recall any investment analyst being this positive about a first gen Apple product before. Perhaps this is a testament to how impressive the Vision Pro is, even in its first iteration. This gives me high hopes for its future prospects, both as an investor and as an Apple enthusiast. 
    jas99Bart Ywatto_cobra
  • Reply 16 of 21
    Apple really needs to step up to the plate with AAA gaming in this thing if they want to push it. 

    Other than content viewing, gaming is the main thing that consumers will be drawn to with a headset. 

    But then again, oculus, psvr, etc. haven’t really taken off like hotcakes or anything, despite the games. 

    We’ve seen this concept done msny time over. From th rudimentary virtual boy to arcade setups to various headsets and now Vision Pro. The main difference between apples headset and others is better specs. While you reall Must have top tier screens and cameras in order to truly get the immersion vibe, I don’t know that it’s enough to differentiate. The concept remains the same. But it’s apple and they’ll keep at it when others give up. This will be getting interesting. 
    watto_cobra
  • Reply 17 of 21
    blastdoorblastdoor Posts: 3,292member
    tht said:
    Morgan Stanley currently forecasts that Apple's headset business will "conservatively" ramp up to $4 billion per year in revenue after four years. In theory, this would be below the product ramps of the Apple Watch and AirPods in their post-launch timings.
    $4b per year is 1.1m units at $3500 in the 4th year of sales? Yeah, conservative. They may be able to do that in year 2 or year 3.

    As a contrast, Meta's Reality Labs division has never made $4b per year. Here's Reality Labs' financial performance:


    This is amazing, and speaks to Zuckerberg's absolutely control of Meta. That operating loss line continues to scale with the revenue line. This implies that if Meta sells more Quest units, they will have more operating losses. IOW, for every Quest sale they have at $500, they lose about $2500.

    A normal CEO would have stopped this a year ago, at least. That loss line has to stop getter bigger. There has to be projections in Meta when the Quest ecosystem can pay for itself, and it looks very far away. 

    Would be interesting to see what the AVP financials are like.
    Great graph! So if you dislike Zuck/Meta, the way to help bring him down is to buy as many Quest units as you can and just put them on a shelf, unopened. 
    Bart Ywatto_cobra
  • Reply 18 of 21
    harrykatsarosharrykatsaros Posts: 76unconfirmed, member
    Priaptor1 said:
    As a spatial computer, until Apple gets this typing nonsense down, no way.  It took me 10 minutes to get a password into Disney.  This is a nightmare. If you need to use a physical keyboard this is a non-starter.  This needs a complete revamping as this sucks. 
    A vastly improved AI Siri will be the way forward for input. If Apple’s LLM can lead to a truly conversational Siri that can understand instruction and context then this issue goes away instantly. 

    A conversational interface is the transformative sci-fi computing paradigm that we’ve always imagined and incredibly we’ve actually reached that point. After a decade plus of almost no movement in this space, it’s suddenly so close and advancing so quickly. 
    watto_cobra
  • Reply 19 of 21
    RespiteRespite Posts: 111member
    Priaptor1 said:
    As a spatial computer, until Apple gets this typing nonsense down, no way.  It took me 10 minutes to get a password into Disney.  This is a nightmare. If you need to use a physical keyboard this is a non-starter.  This needs a complete revamping as this sucks. 
    A vastly improved AI Siri will be the way forward for input. If Apple’s LLM can lead to a truly conversational Siri that can understand instruction and context then this issue goes away instantly. 

    A conversational interface is the transformative sci-fi computing paradigm that we’ve always imagined and incredibly we’ve actually reached that point. After a decade plus of almost no movement in this space, it’s suddenly so close and advancing so quickly. 
    Having to speak aloud your passwords is a non starter.
    williamlondon
  • Reply 20 of 21
    thttht Posts: 5,444member
    Priaptor1 said:
    As a spatial computer, until Apple gets this typing nonsense down, no way.  It took me 10 minutes to get a password into Disney.  This is a nightmare. If you need to use a physical keyboard this is a non-starter.  This needs a complete revamping as this sucks. 
    A vastly improved AI Siri will be the way forward for input. If Apple’s LLM can lead to a truly conversational Siri that can understand instruction and context then this issue goes away instantly. 

    A conversational interface is the transformative sci-fi computing paradigm that we’ve always imagined and incredibly we’ve actually reached that point. After a decade plus of almost no movement in this space, it’s suddenly so close and advancing so quickly. 
    They will eventually be able to have the virtual keyboard placed on a table top and be able to track 10 fingers. So, 10 finger typing will be added imo. Not sure about the 12ms latency though. Might need 6ms for this. 

    They haven’t even made physical keyboards visible for immersive environments. Lots of things were left for later revisions and they have lots of bugs to fix as is. 
    watto_cobra
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