The tech sector has sailed into one of the worst sell-offs since the dot-com bust of 2000, and a potential recession is threatening to make things worse. While 2023 may be a year of pain for most tech firms, it could see the re-emergence of a tech trend that’s since cooled off — the metaverse. That could accompany a battle for mixed-reality headset supremacy, with Apple (NASDAQ:AAPL) and Meta Platforms (NASDAQ:META) at the forefront.
Indeed, Meta is looking past the troubles weighing down its social media “Family of Apps” to the metaverse with its latest and greatest VR/AR headsets. The company has reportedly spent around $36 billion on metaverse projects with the hopes of becoming a pioneer in the space and having a front-row seat to the next big thing. Indeed, Mark Zuckerberg wants to get back at Apple by innovating its way to its own ecosystem. Maybe then, Zuckerberg can take bigger jabs at the iPhone maker.
Many investors view Meta’s metaverse bets as a cash sink. Arguably, the company doesn’t really have much to show that can justify its lofty $36 billion (and counting) investment. It may take more than VR “legs” and facial expressions to excite investors as metaverse hype continues to sag along with most other expensive forward-thinking technological endeavors.
The Meta Quest Pro may be equipped with all the most intriguing technologies. However, the price tag is steep, and the value for the average tech-savvy consumer seems to be limited.
For now, Meta’s latest headset seems to be more appealing to a very niche audience of early adopters. I think it’s safe to say that most budget-constrained consumers are not willing to take the plunge into the metaverse until there’s a truly game-changing experience.
Nobody knows when VR and AR will be ready for their prime. Rising interest rates and spending cutbacks could push the metaverse’s prime time a few years later. Indeed, many investors and analysts already think Meta is too early to the game.
Could Apple’s Headset be Weeks Away from an Unveil?
It’s no mystery that Apple’s working on its own headset. Apple analyst Ming-Chi Kuo recently noted that an AR/MR headset launch will be pushed out to late 2023 from early 2023. Still, Kuo thinks Apple will likely reveal such a headset as early as January – that’s just weeks away!
Such an announcement could garner hype that rivals the iPad reveal or perhaps the first iPhone. Kuo believes Apple’s offering could be a “game-changer for the headset industry.”
In any case, such a shocker could help Apple stock break out of its nasty funk while applying even more pressure to Meta Platforms stock.
AAPL stock is down around 27% from its highs amid growing recession fears and negative news surrounding iPhone shipment cuts. Meanwhile, Meta stock is off just shy of 70% from its 2021 peak.
Even if Apple pulls the curtain on a new headset, there are no guarantees that investors will applaud the move. In recent years, many Apple events have been met with muted reactions. Given that the metaverse has been a term going into hibernation amid the tech sell-off, it remains to be seen whether Apple can reignite interest in the firms looking for the next step after smartphones.
In any case, I think AAPL and META shares present value as we look to close off 2022. Apple stock goes for 21.6 times trailing earnings, while Meta stock commands a ridiculously-low 11.2 times trailing earnings multiple.
Even though Meta is the current headset leader, there are doubts as to whether it will be in a year or so from now. Regardless, things will be interesting as Apple looks to apply pressure to a rival it loves to manhandle.
What is the Price Target for Meta and Apple Shares?
Wall Street is bullish on both stocks for 2023. The average META stock price target of $148.12 implies 26.73% in gains, while the average AAPL stock price target stands at $179.10, implying 37.74% upside potential.
Conclusion: Apple Could Give Battered Metaverse Stocks a Second Look
Dismiss 2023 as an uneventful recession year that will see the bear market drag on, if you will. Despite fading economic conditions, the year could be significant for headsets and the metaverse. An Apple headset unveil could be a boon for both Apple and Meta shares as investors give battered metaverse companies a second look. As a result, I am bullish on both AAPL and META.
