Move over, Meta: Evercore's bullish with Street-high target on this giant's AR/VR work
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Virtual reality and augmented reality have become hot topics in investing since Facebook first went meta with a pivot last summer (and now, of course, they're Meta Platforms).
There's another very-deep-pocketed tech company set to make a splash into AR and VR - and with wearable devices becoming an important growth vector, Evercore ISI thinks it's going to make a splash soon: Apple (NASDAQ:AAPL).

The firm is confident enough that a product launch is imminent that it says an upcoming release will serve as a catalyst moving the stock price toward its now-raised, Street-high target of $210 (that's 22% upside from yesterday's close).
"We think investors continue to underappreciate AAPLâs potential to innovate and enter new markets where they can leverage and scale AAPLâs unique platform and vertical integration capabilities," analyst Amit Daryanani and team write.
While Facebook (NASDAQ:FB) made AR/VR into a hot topic, Apple has been working on solutions in the area for four-plus years, Evercore says, and "we expect the hype into a formal launch in late 2022 to serve as a catalyst." Such a device would allow Apple to extend iOS - and "importantly," their App Store - from the iPhone into the VR world.
With the confluence of more than 100 Apple patents, acquisitions in the space (like Xnor.Ai, SensoMatic, NextVR and more), and app development resources like investments in ARKit, there's a "high probability" that Apple will launch AR/VR headsets (internally called N301) and/or Apple Glass (N421) over the "next 6-12 months."
Evercore expects a headset would arrive before any Apple Glass product. It thinks the headsets won't be positioned as an "all-day" device but rather for key use cases of gaming, media and communication, running on Apple's own silicon and homegrown Reality OS - and all that means a premium price of $750 or more.
Assuming an average sales price of $750, and Apple sells some 6-7 million units in year one (fiscal 2022), that implies $5 billion revenue opportunity at first; but then as apps and use cases emerge, expect a spike in adoption in the out years given a heavy installed base, Evercore says.
If that installed base grows to about 7.5% of the iOS installed base, "we think an AR/VR product could generate revenue/EPS of $18.1 billion/$0.19 in its fifth year on the market." In a more bullish scenario, if the adoption trend is more like AirPods, the contribution could be $38 billion in revenue and about $0.41 in EPS (about an 8% contribution).
Implied trust matters: A recent survey suggests that 35% of consumers would prefer to buy an Apple AR device, and that result comes even without a formal product from the company in the market.
Overall, the firm expects 2022 to be a strong year for Apple product launches, ranging from an iPhone SE in Q1, to the AR/VR product, iPhone 14 and even more.
Yesterday in Notable Calls, Baird said its top big-cap pick among cloud software companies was Apple, bolstered by strong margins and cash flow.