Apple Expected To Expand Selection Of IPhones

Apple Inc AAPL is accelerating its efforts in the AR space, reports The Financial Times. However, it adds that a retail launch is unlikely to happen in the near future.

There have been quite a few rumors regarding Apple's AR efforts, as CEO Tim Cook has emphasized on developing the technology time and again in the last few months. Cook had reiterated the company's AR efforts for the first time at its third quarter fiscal 2016 earnings conference call. He has been quoted saying "AR can be really great, and we have been and continue to invest a lot in this. We are high on AR for the long run. We think there are great things for customers and a great commercial opportunity." In fact, he has been quoted by media reports saying not VR but AR will be "the larger of the two, probably by far".

In November last year, Bloomberg stated that Apple was mulling over venturing into the wearable headsets space but is unlikely to initiate "mass production" as it has just ordered a small number of near-eye displays for testing purposes from a supplier. Bloomberg also claimed that if all goes well then AR glasses will wirelessly connect to an iPhone and will display information and images directly in front of the user's field of view. 

Moreover, in January this year, tech blogger, Robert Scoble, citing a Carl Zeiss employee, stated that Appleis working on AR/mixed reality headsets and has partnered with the renowned lens maker. He was more optimistic about retail launch as he stated that the glasses could hit stores as early as this year.

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However, Apple has refrained from commenting on any of these rumors. The company has a habit of maintaining secrecy regarding its new products.

Apple is under tremendous pressure to introduce new offerings, as it's most important growth driver-the iPhone-faces decelerating demand. iPhone alone contributed about 70% of Apple's total revenue in the first quarter of fiscal 2017. 

Better-than-expected iPhone 7 and 7 Plus sales have definitely come as a respite. But the macroeconomic headwinds remain for now, especially in China, one of its high-growth regions. Apple revenues declined around 12% year over year in the Greater China region to $16.2 billion. Also, competition from local players has been hindering iPhone's growth in this region. Slowdown in demand from key regions like China, if continued, can significantly impact Apple's financials going ahead.

Apple has been exploring newer growth avenues to boost its topline. With so much buzz created by AR/VR and AI technologies, the company has started to focus on its development. These are fast emerging as lucrative business opportunities. According to a recent IDC report, global revenues of the AR/VR market are expected to grow at a CAGR of 181.3% from $5.2 billion in 2016 to over $162 billion in 2020.  Bloomberg, which quoted Global Market Insights figures, reported that the global market for AR products will surge 80% to $165 billion by 2024.

Per Bloomberg, Apple has built a team combining people who have experience in working on Facebook's FB Oculus and Microsoft's MSFT HoloLens. The company has also acquired several smaller firms with expertise in AR hardware, 3D gaming and virtual reality software. These include Flyby Media, Emotient, TupleJump, Turi, Metaio and PrimeSense.

Not only Apple, but all tech giants-right from Alphabet GOOGL , Facebook to Microsoft-are scrambling to grab a share of this lucrative market. Facebook had acquired Oculus in 2012 to fuel the company's ambitious VR efforts. Moreover, media reports add that Facebook is likely to unveil four consumer hardware products at this year's F8. These include drones, brain scanning technology, AR and next gen cameras. In March 2016, Microsoft started shipping its AR headset, HoloLens.

Zacks Rank & Stock Price Movement

At present, Apple carries a Zacks Rank #3 (Hold). You can see  >the complete list of today's Zacks #1 Rank (Strong Buy) stocks here

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Apple's shares have marginally outperformed the broader market over the past one year. Shares of Apple have registered growth of 33.95%, compared with the Zacks  Computer Mini  industry's gain of 32.95%.

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