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Apple stock: Why a headset could send shares even higher

Apple is rumored to reveal a mixed reality headset at their latest WWDC event. Could it be a catalyst to send Apple shares to new highs? eToro Global Markets Strategist Ben Laidler and Tom Essaye, Sevens Report Research Founder and President, discuss how mixed reality headsets could become a tech sector market driver.

Video transcript

JULIE HYMAN: We got to get to Apple. Apple, which historically underperforms the market on the day of its Worldwide Developers Conference, it's getting a little boost today. In advance of it, analysts are expecting this year's event to be a more positive catalyst. And Ben Laidler of eToro, Tom Essaye of the Sevens Report Research, both of you are still with us.

Guys, it looks like Apple could actually open at a record today if it does keep moving in the same direction it has been pre-market here. $182.01, that's the closing record high that was reached in January of 2022. Ben, you talked a little bit about Apple. Talk to us more about how much of a catalyst this new VR/AR hotly anticipated headset could be.

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BEN LAIDLER: Yes. On the one hand, I hear you say that and I get very worried, especially given that it's sort of metaverse and AR/VR, and everything else, right? It's got sort of damp squib written all over it. But if anybody can pull this off, if anybody can develop this consumer ecosystem around-- they'll never call it the metaverse. I'm going to call it the metaverse-- it's them.

And they could do the new growth driver, right? Growth forecasts have sort of flattened out. As you mentioned earlier, they haven't had a big new product launch since the iWatch and the AirPods. So I think this makes it sort of quite significant as putting a little bit more fuel in the tank of a stock, which was up 40% this year when revenue expectations are basically sort of unchanged.

And then I'll just have two quick things. I mean, this is also broadly important for our metaverse, which everyone's forgotten about. And secondly, and dare I say it, for semiconductors, right? For these things to work, you need high performance chip. So all roads lead back to semiconductors and Nvidia.

BRAD SMITH: Ben, I didn't forget about the metaverse. I just didn't want to think about it, quite frankly. I mean, nobody was asking for it. But I guess there is a reality that we'll all be thrust into in the future. Whether or not we'll have legs in that reality, we'll figure out. But at the end of this too, we've got to think about why this type of technology is even being pushed forward.

And Tom, would love your perspective on that because I mean, I haven't been clamoring for a headset and virtual reality. But yet even though we know, hardware is hard as the old adage goes. Apple, multiple other companies, Facebook, Meta platforms, rather, they're still continuing to develop around this.

TOM ESSAYE: Yeah. And I think it just goes to the forward-looking part of the company, right? I mean, I agree. VR headsets, they are a bit puzzling to me how this is going to see widespread adoption. But at the end of the day, we didn't think that the iPhone was going to put taxis out of business by Uber, and we didn't think the watch was going to essentially become a fitness app, right?

So I think that there's value in pushing the needle forward and sort of seeing what happens. I mean, for this to be successful for Apple, the market we're in, they need to just call it the AI headset and certainly Apple would explode to a new all-time high, even though-- but I do think this is them just being proactive.

They'll make money off of it. Will it move the needle for a company that's big? Of course, not. But who knows kind of what it leads to down the road? I mean, we've seen that over and over again with these products. So this is a moment for tech. We have to remember how quickly the script has flipped.

Remember, if we were talking at this time last year, tech was getting killed. And everybody was saying, oh, this is the dotcom all over again where the world is going back to the way it was. Now we're a year hence, and everybody's in love with AI. And it's a moment, and they should ride it. And it'll be good for shareholders.

JULIE HYMAN: Well, and to expand upon Apple specifically a little bit, not so much the tech but the stock movement. I mean, you talk about before that narrow leadership that we've seen. It's broadened out a little bit, at least in Friday's rally. But if Apple does make this new high, which at least in pre-market, it's getting there, what does that mean for the overall market?

TOM ESSAYE: I think it's positive, right? And look I get the market breath worry, especially old school technicians will scream about this. But all of us who were in this business in 2015 to 2019 and remember the FANGs, everybody said it couldn't last, couldn't last. It lasted four years. And it's because it is part of the new economy. And that hasn't changed.

So I think that Apple making new highs is good for the market. I personally was happy on Friday to see more sectors participating. I think that's a good thing. But listen, Apple is a major part of this market. There's a reason for that. And new highs are good for everybody with long stocks.

BRAD SMITH: Ben, this means that we're also entering into and have already found ourselves in the midst of an era of spending for a lot of tech companies as they're trying to best position themselves for that next leg of growth. What would you look to kind of discern whether or not a company is either spending in the right direction and whether shareholders can be appreciative of that capital that they're putting forward?

BEN LAIDLER: Yeah. I guess I would sort of caveat that. We've come through an era of enormous spending. And that was part of the big sell off last year, right? Investors basically said, enough's enough. And part of the bull case for this year, you know, again, it's not just AI. It's also the fact that these companies have big cost levers to pull on. They are pulling them. Earnings have been terrible, right?

This is all about the future. And I think there are two levers there. One is the potential growth that could come from the metaverse or AI. But I think the unsung one is the big cost cuts they're doing. So yes, I would love them to go and discover the next new product. But I think we're also very, very focused on them defending those moats, defending those margins, and cutting back those costs, which frankly, they over-expanded on in 2020/2021.

BRAD SMITH: All right. Ben Laidler, and Tom Essaye both joining us this morning. Thanks so much for that breakdown. Look, we've got a lot to continue to discuss here this morning. We appreciate the time.