Will Apple's MR Headset Be A Hit Or Flop? Munster Says This Is What Most Investors Expect

Apple, Inc. AAPL is all set to unveil a new product category after an eight-year gap. The long wait could be over as the company is widely expected to preview its $3,000 developer version of its mixed-reality headset at its annual Worldwide Developers Conference on June 5.

Deepwater Asset Management's Gene Munster offered his take on the launch in a note released on Friday.

Launch Time’s Logic: Apple has chosen WWDC, a typically software-focused event, for the launch of the event, Munster said. Product announcements at the event are typically modest upgrades, he added, noting that iPhone and iPad were announced in January and the Watch in September.

The reason why Apple has chosen the WWDC for the headset launch is for winning developers, Munster said.

If Apple were to wait for the utility of the wearables to become apparent to the masses, Meta Platforms, Inc. META, Alphabet, Inc. GOOGL GOOG and Microsoft Corp. MSFT would have already surged ahead, making it difficult for Cupertino to gain traction, he said.

Apple would want to win developers over its "best-in-class" device so that the latter can jump in and build products to unearth the utility of the device, he added.

Munster also shared data on the number of headsets sold industrywide in 2022 to show soft uptake of the product so far. He noted that 3.3 million MP3s were sold in the year before the iPod, 81.9 million smartphones before the iPhone and 6.9 million smartwatches before the Apple Watch.

In comparison, only 8.8 million headsets were sold in 2022, with three-fourths of those likely not being used, the fund manager said. He, therefore, estimates that the active base of units sold in 2022 is 2.2 million, below the 3 million active base for MP3s in 2000.

See Also: Everything You Need To Know About Apple Stock

Impact On Apple's Business Model:  If Apple's MR headset turns out to be a flop, it could have the impact of Newton, Apple failed personal digital assistant launched in 1993, Munster said.

Newton dragged earnings but did not sink the company, he said.

Munster estimates that if the headset is a bust, it would bring in fractional revenue and have a 3%-4% negative impact on earnings, given the $25 billion expenses related to development and marketing over the next five years.

“I believe most investors expect the product to be closer to a disappointment than a success,” the tech analyst said.

On the contrary, if the product turns out to be a hit, it has the potential to account for 10% of Apple's revenue in 2030, Munster said. This compares to Watch and AirPod, which account for about 5% of the sales each.

The revenue estimate is based on the following assumption:

• Starting price point: $3,000
• Consumer-friendly price point: $700 (to be achieved by 2027)
• Unit growth: 20%  a year through 2026, rising to 60% in 2027
• Sales in 2030 (8^th year of launch): 75 million at $700 price point, translating to $53 billion in revenue

Apple closed Friday's session at $175.16, up 0.11%, according to Benzinga Pro data.

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