Will Apple’s ‘Next Big Thing’ Ignite Its Next Big Rally?

So, let’s get this straight.

First we had virtual reality…

Then came augmented reality…

Of course, everyone is now talking about artificial intelligence…

And today we welcome (back) to the party mixed reality.

My wife constantly accuses me of “mixing reality” all the time.

Isn’t it all kind of mixed reality anyway?

When you factor in “deepfakes,” how do we really know what reality is “real” and what isn’t?

There doesn’t have to be the same uncertainty with stocks: Data can tell us what’s real – if we’re sure that data is, well, real.

So, let’s turn to that data … and what my version of it tells us about the company that just made a grand foray into mixed reality – Apple (AAPL).

Could this be the “next big thing” for Apple – the catalyst for higher share prices that folks are always looking for?

And more importantly: Is the stock worth buying?

Looking Through It, Not At It

Apple kicked off its well-known Worldwide Developers Conference (WDC) today. This annual event always features pretty cool software and product announcements from the company. But the 2023 version had more buildup than usual. (Which is saying something.)

The ubiquitous buzz talked about the company’s most-ambitious and most-important product launch in a decade – a “mixed-reality” headset.

After the Mac computers, Apple’s first mega success was the iPod. That ultimately led to the iPhone – a product that changed everything and a success story Apple will probably never replicate – as well as the iPad, the Apple Watch, and a few others sprinkled in for good measure.

As Apple got bigger and bigger and bigger, the question was always what super cool innovation the company could come up that would move the sales needle of a $3 trillion behemoth.

Will it be Apple’s new Vision Pro?

This AR/VR headset, which combines augmented reality and virtual reality, is the first new major product for Apple since the company’s watch was introduced nearly nine years ago.

Source: Apple

In his talk today, Apple CEO Tim Cook said this announcement “marks the beginning of a new era for computing” – one the company is referring to as spatial computing.

Users control the headset using their hands, eyes, and voice. It can switch from computer mode to augmented reality to virtual reality to just plain reality. Mac owners can also connect their computers to use the goggles as the monitor.

The company didn’t say whether you could ski or snorkel with it, but it looks like you could.

Vision Pro will be available early next year, so don’t put it on your holiday shopping list quite yet. And if you decide to get one, be prepared to part with $3,500.

Will It Move the Needle?

Will this latest, greatest innovation be enough to boost sales, which declined less than a percent in 2022, and sales, which increased nearly 8% last year?

Honestly, I’m not sure. That’s a hefty price tag for a type of product that has been a niche offering in gaming for Meta Platforms (META).

Still, Apple has a history of making us realize we need something we never thought about before. So I think I’ll stay in wait-and-see mode.

For investors, though, the even bigger question is… Does this new product change the calculus?

Let’s run AAPL through our Quantum Edge system to see what our strategy is telling us right now:

Quantum Score: 77.6. Excellent. Right in the target “buy” zone.

Fundamental Score: 66.7. Very good. But not blow-the-roof-off outstanding. One- and three-year sales growth is “okay” – but not great. That’s not surprising for a company of Apple’s size – especially in the inflation-ridden environment of the last year.

Earnings growth is expected to accelerate over the coming three years. Profit margins are good. And valuations are a little rich after the stock’s 40% climb here in 2023.

Technical Score: 85.3. Very strong, which is also not surprising after the big run. Shares hit a new 52-week high just today. That means they are trading above their key moving averages, and internal technical measures also show strength.

And then there’s Big Money. Institutions account for 70% to 90% of daily volume, and that Big Money moves stocks.

Not surprisingly, AAPL is a Big Money favorite.

Institutions own 60% of shares, and our system has picked up 14 “buy” signals (unusually heavy buying) in the last four months.

The two green bars on the far right are “buy” signals from just last Thursday and Friday.

Apple pretty well checks all of our Quantum Edge boxes… very good fundamentals, exceptionally strong technicals, and Big Money is flowing in.

I would say this all gives AAPL stock a 70% chance of rising from here, which equals the overall success rate of our system.

The question: How much does it rise?

The company’s massive market value, huge top line and recent surge might limit the upside a bit. But it’s hard to find a whole bunch wrong with this stock right now.

There’s also an option here – an alternative to the Vision-Pro-acclerated Apple shares. It’s one that investing pros often refer to as a “pick-and-shovel” strategy. Take a look at the company’s suppliers. Many have ridden Apple’s coattails to big gains through the years.

In fact, we have one of Apple’s big suppliers in my Quantum Edge Trader portfolio. I’m talking about Taiwan Semiconductor (TSM), the world’s biggest contract chipmaker and a venture that supplies advanced chips for iPhones and Mac computers.

TSM and AAPL have each gained more than 30% so far this year.

With a  Quantum Score of 79.3, Taiwan Semi actually rates higher than Apple. Its Technical Score is slightly lower at 82.3. But its Fundamental Score is a stronger 75.

The one thing Vision Pro can’t do is predict the future. And I don’t have my headset anyway, so I’m not going to predict that new product is the next defining moment for Apple.

But I can read and analyze my data. And those numbers show me there are multiple ways to make money off giant companies riding gigantic megatrends. In this case, I think Apple and smaller companies riding the iDevice giant’s coattails are both poised to move higher.

Talk soon,

Jason Bodner
Editor, Jason Bodner’s Power Trends