China’s challenges, AI teasers and ultra-expensive headsets

The market is buzzing today about Meta Platforms’ (NASDAQ:META) upcoming 50 cents per share dividend. Obviously, Apple (NASDAQ:AAPL) has been distributing quarterly dividends for decades, and its future annual dividend yield is higher than Meta’s, so something new can always be more buzzy than something old.

That said, there’s no denying that Meta’s explosive quarter was more eye-catching than Apple’s Q1 2024 results. But Apple’s quarterly results and guidance aren’t the only notable developments. The iPhone maker also launched a virtual reality (VR) headset, and CEO Tim Cook teased upcoming generative artificial intelligence (AI) product features.

That said, investors shouldn’t be too distracted by Friday’s 21% one-day surge in META stock to overlook another important Magnificent Seven member. Perhaps if Apple can overcome these challenges, it could deliver outstanding value to shareholders this year.

Apple announces expensive headsets and AI

Ahead of the main event, which is Apple’s earnings report, we can’t ignore other recent developments from the company. Among them is the company’s long-awaited launch of its Vision Pro VR headset, which is now available in stores.

I heard that this headset is described as mixed reality and augmented reality, but I don’t need to explain it here. Importantly, Cook touted the product as “the most advanced home appliance ever created.”

That’s a huge claim, and there’s a certain level of corporate credibility in charging $3,499.99 for a headset. But we’re not talking about flying device manufacturers here. Apple is the industry leader, so people will actually pay $3,500 for a Vision Pro headset.

The data supports this idea, as Apple reportedly received between 160,000 and 180,000 Vision Pro pre-orders over the weekend. Another report claims that “approximately 200 people lined up ahead of the 8 a.m. launch” to purchase the Vision Pro headset at Apple’s New York City flagship store, “including customers from around the world.” So, we just have to wait and see whether this expensive piece of equipment is a bestseller or a flop.

Meanwhile, Big Tech CEOs are almost required by law to mention AI multiple times in their earnings reports, so it’s no surprise that Cook declared that Apple is devoting “tremendous time and effort” to AI. Cook also noted during Apple’s Q1 2024 conference call that the company is “continuing to invest in technologies that will shape the future,” including, of course, AI.

Interestingly, Cook teased that Apple is “excited to share details of our work in that area later this year.” Could the company be on the verge of launching a new product feature with game-changing Gen-AI technology?

Unfortunately, this is unknown at this time.

After letting the cat out of the bag, Cook paused and said: “Without going into too much detail or getting ahead of myself, let me just say that I think there is a huge opportunity for Apple with generative AI and AI.”

China remains a problem for Apple

Cook declared that Apple’s quarterly sales growth was partly “driven by iPhone sales.” Maybe so, but that doesn’t tell the whole story.

To be sure, Apple’s iPhone sales in China did not ‘drive’ quarterly sales growth. In fact, the company’s sales in China fell 13% year over year to $20.8 billion.

This helps explain why AAPL stock fell on a day when technology stocks, led by Meta Platform, were typically rising. Nonetheless, CFRA analyst Angelo Zino appears optimistic about Apple’s performance in Asia, even though China is struggling.

“Growth in the rest of Asia, growing installed base and sustained +10% services growth are good health indicators, even if softness in China means declining share,” Zino argued.

The analyst’s Hold rating and $210 price target for Apple stock seem quite reasonable. Although the company is not in serious trouble, its problems in China are likely to hinder the sales hypergrowth that many investors seem to expect from the tech giants these days.

Anyway, Apple’s quarterly revenue rose 2% year-over-year to $119.6 billion, and adjusted EPS rose 16% year-over-year to $2.18. It’s decent growth, but it’s nothing to write home about, especially for a Magnificent Seven member.

So at this point it’s mostly a waiting game. Will Apple’s expensive headsets sell out or fizzle out? What exactly does Cook have in mind when it comes to future AI features in Apple products? Because these mysteries are not yet resolved, I take a neutral stance on AAPL stock until further notice.