On Monday night, I submitted my order to buy more Apple Inc (NASDAQ: AAPL) shares, now the third-largest position in my portfolio.
I know what you might be thinking… pouring more money into a company with a US$2.9 trillion market capitalisation, valued at nearly 30 times earnings, and expected sales decline of its core product (the iPhone) — he's lost the plot this time.
Yet, there I was, in the late hours of the night, gleefully adding to my shares in the 48-year-old US tech giant. See, I think many onlookers are missing the forest for the trees amid Apple's newest addition to the product lineup: Apple Vision Pro.
Reminiscent of the iPhone release
Frivolous and unduly expensive… terms that some might label the futuristic-looking augmented reality headset. Does it sound familiar?
At US$3,500, the Vision Pro headset (pictured above) is certainly not a cheap piece of gear. However, the original iPhone was not either when it launched in 2007.
Apple's first crack at a cell phone carried a price tag of US$499, or US$733 when adjusted for inflation, at a time when other phones valued between US$350 to US$400 were considered the top end. Plenty of naysayers dismissed the product, overlooking the value of its exceptional software and interface.
The real 'aha' moment came when developers flocked to iOS. Quality touchscreen displays unlocked endless possibilities for entertainment and productivity applications, allowing customers to assign more value to the iPhone beyond 'just a phone'.
I'd argue the same could be true of Vision Pro once developers exploit the immersive interface.
A new wave for Apple shares?
Apple App Store developers generated US$1.1 trillion in billings and sales in 2022. Owning this enormous ecosystem, Apple collects fees of between 15% and 30% on its sales. This revenue stream forms part of the company's 'services' segment, which accounted for about 19% of net sales in Apple's last quarter.
The services category is critical to why I bought more Apple shares. As more use cases are addressed by apps, Apple can clip the ticket at near-nil cost.
With more of our everyday tasks and activities passing through a glass display, Apple's toll booth-style business has delivered solid growth. Now imagine a world where even more actions (both menial and masterful) are traversed through an Apple product.
Interacting with 3D models
Watching your favourite sport
Learning an instrument
Carrying out surgery
So here's my elevator pitch on why I loaded up on Apple shares…
Developers will find more innovative ways to utilise Apple's new platform over time. The hands-free, immersive experience lends the Vision Pro to high-value use cases. For this reason, Apple's digital toll booth could see an order of magnitude more money flow through it in the next decade.
Meta Platforms Inc (NASDAQ: META) is the only serious competitor currently with its Meta Quest 3. As such, there's a real chance a duopoly could form, allowing both companies to realise incredible shareholder returns.
Given Apple's track record of marrying hardware and software, I'm confident it will repeat its success in the headset domain.
Apple shares now account for 7.9% of my portfolio after this week's investment.
