Bank of America reaffirms Apple's Buy rating over Vision Pro

Apple's (AAPL) new Vision Pro headset went on sale last week at a starting price of $3,499. Bank of America analysts reiterated their Buy rating on Apple after testing out the AR/VR headset.

Yahoo Finance's Pras Subramanian, Josh Schafer, and Alexandra Canal weigh in on the value of this new wearable product to Apple's earnings across the coming years.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video transcript

[AUDIO LOGO]

JOSH SCHAFER: Welcome to Yahoo Finance's Group Chat. I'm Josh Schafer, here with Pras Subramanian and Alexandra Canal. And today, I want to talk about the Apple Vision Pro. When it was first announced, we sort of got mixed views on what to expect, right? We've been wondering what to expect from this product for a while now. And it was interesting to see some Wall Street banks coming out and starting to really give firm expectations for what they do expect for this product. Bank of America coming out and saying that they expect Apple's Vision Pro to contribute $0.68 to $0.89 per share to EPS earnings per share over the next five years, so kind of putting an actual number in estimates for what they expect us to bring to Apple.

We know, of course, with all of Apple's other products and how product sales work, you basically do attribute, OK, we expect you to sell X amount of units at so-and-so price. That's going to contribute this amount to earnings. And I just felt like, for me, the Vision Pro, we weren't really there yet, right, in terms of what actually is going to happen and how meaningful it's going to be. But it seems like B of A at least coming out and saying this is, long-term, going to be a product to watch seriously in terms of Apple's growth.

PRAS SUBRAMANIAN: Yeah, I was a little surprised at that, pegging that with $0.90 to EPS growth, to EPS--

JOSH SCHAFER: 68 to about 89 [INAUDIBLE].

PRAS SUBRAMANIAN: Right, for full-year EPS. I mean, that's a significant amount for a product that I thought was actually pretty niche in terms of applicability, what its use case is for. They do mention bullish-- they're bullish on the fact there's 600 apps they're going to be out for that. So there's a bunch of different ways that product can be used. But my point is that I think this is based on-- that growth is based on the product being cheaper. And I think if anyone can do it, Apple can do it. Tim Cook did it with the iPhone, did with the iPad, brought down those really expensive initial prices down to like more palatable, what people could-- most people could afford, I think.

ALEXANDRA CANAL: Yeah, I think you said it Pras. If any company is going to successfully do this, it is Apple. They have the technology. They have the data. They just have the means to really create this kind of fanfare, I think, over something like this. And you mentioned the apps, which I thought was super interesting. 25 apps that are already going to be built in, and then 600 that are specifically designed for the Vision Pro. Now there are some notable names that are going to be off this list, Netflix, YouTube, Spotify. They've said they are not going to be making apps specifically for this. But perhaps they will down the line. We know Disney CEO Bob Iger is on board. He was on stage with Tim Cook, with the Vision Pro headset. Remember that?

PRAS SUBRAMANIAN: Disney's not going to do it?

ALEXANDRA CANAL: No, Disney is going to do it.

PRAS SUBRAMANIAN: Yeah, all right, OK.

ALEXANDRA CANAL: Yeah. But some of the competitors might not. But if this takes off and contributes to EPS, we know Apple has really been doubling down on the services side of the business. We've seen a lot of momentum there, with the wearable devices, even with Apple TV. There's a world there where I could just put on my Vision Pro, watch TV on a plane, a train. I mean, there's a lot of possibilities here.

That was what I was going to say, too, is the other thing, right, to note from the research from B of A and sort of where they're coming from here. They're bullish on the services industry for Apple as a whole, and they like that part of the business. So then you think about how the Vision Pro fits into that, and it's essentially just an expansion of the services business, right? If you are making money off someone from Apple services, and then you give them another product, it's not necessarily a reach to assume that the services will grow as that hardware grows.

PRAS SUBRAMANIAN: Yeah, service is a big deal for Apple, of course. And I saw the NBA, there's an NBA app for that. I don't know if you guys see it online. It looks really cool. You can basically put that thing on anywhere watch a game or watch--

ALEXANDRA CANAL: Sports, it's a huge game changer.

JOSH SCHAFER: We're all wearing one at some point, and doing a segment--

ALEXANDRA CANAL: I hope so.

JOSH SCHAFER: --in the Vision Pro verse.

ALEXANDRA CANAL: Apple, can you please send us some Vision Pros. Thank you.

PRAS SUBRAMANIAN: Well me--