Stock Analysis & Ideas

Apple Stock: WWDC Innovations Suggest Big Video-Game Push Coming

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Apple has been making major strides in its services business. After WWDC 2022 unveiled intriguing graphical hardware innovations, is Apple capable of evolving into a gaming behemoth ahead of its much-anticipated mixed-reality headset launch?

Apple (AAPL) excited many Mac gamers when it unveiled the capabilities of its latest M2 chip. With a few triple-A titles, including Resident Evil: Village and No Man’s Sky coming to the Mac later in the year, the Mac may be on the cusp of challenging today’s specced-out gaming PCs.

Now, the Mac has shied away from video gaming for most of its history. However, recent hardware advancements and Apple’s broader gaming push (think the Apple Arcade service) could pave the way for a bigger move into one of the fastest-growing consumer markets out there.

Undoubtedly, gaming has grown to become larger than video streaming and music combined. Apple is an established player in Music, with its flagship Apple Music service, while its Apple TV+ video-streaming service is starting to pick up meaningful momentum. Apple Arcade, Apple’s mobile-centric gaming service, has experienced some success, but not to the magnitude of its rivals, most notably Microsoft (MSFT), which has evolved into a gaming juggernaut.

Now that the latest and greatest Macs are catching up in terms of graphical capabilities, Apple may be ready to introduce some larger-budget titles to Apple Arcade, designed to be played on Mac or Apple TV.

The MetalFX upscaling technology featured in WWDC 2022 was impressive and could mark the beginning of an initiative to capture the hearts of gamers, many of whom have stuck with PCs and consoles for decades.

Macs aren’t exactly a type of computer known for their gaming capabilities. With M2 and MetalFX, that could change, especially if Apple looks to rival Microsoft’s Xbox Game Pass subscription with Apple Arcade.

It’s hard not to be excited about Apple’s hardware and gaming performance after WWDC 2022. I remain bullish on the stock.

On TipRanks, AAPL scores a 9 out of 10 on the Smart Score spectrum. This indicates a high potential for the stock to outperform the broader market.

Can Apple Arcade Level Up a Gaming Market Push?

Apple has been a mobile-gaming powerhouse for many years. The Apple Arcade service is the best of its kind. However, Netflix (NFLX) could evolve to become a worthy competitor, as it seeks to offer mobile games to keep its existing subscriber base from canceling their subscriptions.

Still, Apple needs to push beyond mobile to make a smooth transition into the metaverse. Indeed, it’s no secret that Apple’s working on a virtual- or augmented-reality headset. It may be closer than many of us think. The biggest attraction to such next-generation mixed-reality technologies is gaming. Gaming may very well be the onramp that entices users to make the initial purchase.

As Apple looks to new frontiers, it has to move beyond mobile gaming, and bringing triple-A titles to the Mac is a great first start. Eventually, Apple Arcade may grow to include Mac-exclusive titles, and, eventually, headset-exclusive augmented-reality experiences.

Resident Evil and No Man’s Sky are older triple-A games that have been on the market for quite a while now. Two older games coming to Mac are unlikely to cause a gamer to buy a Mac over a gaming PC. That said, the two games built for Apple’s M2 chip could be just the start of what’s to come.

Looking ahead, Apple will need to incentivize game developers to unlock the power of its M-series chips. If it’s able to, Mac may very well catch up to PCs on the gaming front.

Laying a Foundation for AR Headset Games?

Apple laid out a nice foundation for developers when it changed the world with the first iPhone. It’s that foundation that helped the firm build an incredible ecosystem that’s been hard for users to leave. Undoubtedly, mobile games were just one of the many major draws of the iPhone. These days, iPhones do so much more.

As Apple looks to unveil its biggest hardware innovation in years, it needs a similar foundation to make it easy for developers to create apps and gaming experiences. Arguably, augmented worlds will be far more gaming-oriented than mobile phones.

Wall Street’s Take

According to TipRanks’ analyst rating consensus, AAPL stock comes in as a Strong Buy. Out of 27 analyst ratings, there are 21 Buy recommendations, and six Hold recommendations.

The average Apple price target is $186.33, implying an upside of 37.14%. Analyst price targets range from a low of $157.00 per share to a high of $210.00 per share.

The Bottom Line on Apple Stock

With gaming advancements in WWDC 2022 (M2 and MetalFX), I do think Apple is ready to ramp up on gaming so its headset can be as successful as the iPhone.

Indeed, Apple has a lot of catching up to do in non-mobile gaming to catch up to Microsoft, which is also eager to break into the metaverse. Regardless, Apple’s on the right track after WWDC 2022, and it will be interesting to see how the firm can evolve its Apple Arcade subscription to stack up against rivals like Netflix and Microsoft.


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