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You might not previously have thought of Meta Platforms (NASDAQ:META) as a direct competitor to Apple (NASDAQ:AAPL). Yet, they’re now rivals in a highly specialized technology hardware market. So, don’t rush in to buy META stock without weighing the implications of an ongoing battle between Meta Platforms and Apple.
Meta Platforms can always fall back on its digital ad revenue from Facebook, Instagram and WhatsApp. However, CEO Mark Zuckerberg has made it crystal-clear that Meta Platforms is evolving into a metaverse and virtual reality focused company.
Indeed, it looks like Zuckerberg is doubling down on Meta Platforms’ business model transformation. That’s a risky proposition, so think long and hard before you hit the “buy” button with META stock.
A Metaverse Obsession and META Stock
Meta Platforms’ investors have done well in 2023 so far. The stock has relentless moved higher, and this undoubtably has pleased momentum-focused traders.
Yet rallies like this can’t go on forever. As Chris MacDonald pointed out, “A potential recession and Meta’s costly metaverse investments pose challenges to” Meta Platforms’ profitability.
I’m not prepared to predict whether there’s going to be a recession or not. MacDonald’s point about Meta Platforms’ metaverse-market outlays is duly noted, though, as the metaverse doesn’t seem to be a blockbuster revenue generator in 2023.
If anything could halt the unrelenting rally in META stock (besides Meta Platforms’ regulatory issues), it would be Zuckerberg’s refusal to acknowledge that the metaverse hasn’t been as popular as he probably expected.
A quote from Los Angeles Times writer drives the point home: “[E]ven at the peak of its hype cycle, polls found that most Americans had never even heard the term ‘metaverse.’ It didn’t take.”
Meta Platforms Has a Formidable Competitor
“It’s the first Apple product you look through and not at,” Apple CEO Tim Cook declared when he recently unveiled Apple Vision Pro, the company’s mixed reality headset.
Of course, Zuckerberg would probably disagree with Cook’s claim, as Meta Platforms revealed its competing MR headset, called Quest 3, just a few days earlier.
Some commentators might consider it courageous for Meta Platforms to compete head-to-head with a tech behemoth like Apple. Others may say it’s a mission of self-destruction. For what it’s worth, at least Meta Platforms offers a more affordable headset at $499, compared to $3,499 for Apple’s new product.
There’s a great deal of uncertainly surrounding these AR/VR headset launches. KGI Securities analyst Christine Wang expects 200,000 Vision Pro in its first year. In contrast, Credit Suisse analysts envision Apple possibly shipping more than 1 million Vision Pro headsets during that time.
For some shoppers, the Vision Pro high price tag won’t be an issue. Some people are happy to pay over $1,000 for an iPhone. Similarly, they may be prepared to cough up nearly $3,500 for an Apple headset. In other words, Meta Platforms will now have to compete against a brand name that’s associated with deep loyalty.
META Stock’s Rally May Be in Jeopardy
It will be certainly be challenging for Meta Platforms to wage war against Apple in the VR/AR headset market. Still, Zuckerberg is apparently willing to fight that battle, even if it may be costly.
This head-to-head combat could weigh on META stock in 2023, so financial traders need to be careful now. Unless you’re willing to join Zuckerberg and grapple with Apple, you’re better off not investing in Meta Platforms.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.