While Apple Inc. (NASDAQ:AAPL) juggles frazzled concerns over 3D sensing model malfunctions with overheating and an uphill quest to find the under-glass solution for the OLED model with the iPhone 8’s fingerprint sensor, Microsoft Corporation (NASDAQ:MSFT) is edging right along, ready to stake a substantial claim in the future of virtual reality and augmented reality. Rosenblatt continues to be cautious on the tech giant, believing 3D sensing will be an easy fix, but the fingerprint sensor solution is a point for major apprehension. Conversely, Gene Munster tackles Microsoft from an excited stance, encouraging the Street to take a closer look at the dark horse in the VR/AR competition. Let’s dive in:
Apple Stares Down Trouble in 3D Sensing Paradise
Staunchly on the sidelines, Rosenblatt analyst Jun Zhang surveys Apple’s 3D sensing challenges and a prospective production stall in finding a fingerprint sensor solution for the iPhone 8 OLED model. On a positive note, the analyst sees 3D sensing module glitches as short-term struggles for the tech giant, and ones that very well stand to be resolved swiftly. On a more disconcerting note is the fingerprint sensor solution, as not a single one from the supply chain has fulfilled the giant’s requirements.
As such, the analyst reiterates a Neutral rating on shares of AAPL with a $120 price target, which represents a 15% downside from where the stock is currently trading.
Zhang notes, “We initially heard of a 3D sensing module overheating issue in the iPhone 8 which we believe Apple has now resolved, but we more recently heard of an accuracy issue. We believe it’s related to the wide angled structure of lights which Apple will adjust to improve accuracy of face recognition. We expect the issue to be solved quickly.”
“We believe Apple will keep a fingerprint sensor in the iPhone 8, but the under-glass solution for the OLED model will be a concern since no supplier has shown good yield rates so far. For the iPhone 8, we believe Apple changed the fingerprint sensor solution to a printed circuit on the covered glass, which still needs more time before it’s ready. There might be a possible delay in production of the OLED model if the on-glass solution does not meet the accuracy and yield rate requirements of Apple by June. On the other hand, this potential delay might not affect the 3D sensing component shipment schedule since the 3D sensing module lead time is two months,” Zhang contends.
TipRanks analytics show AAPL as a Buy. Out of 38 analysts polled by TipRanks in the last 3 months, 29 are bullish on Apple stock, 7 remain sidelined, and 2 are bearish on the stock. With a return potential of nearly 8%, the stock’s consensus target price stands at $152.87.
Microsoft Ready to Play in AR and VR
Gene Munster – doling out insights from his new research-driven, venture capital firm Loup Ventures – pleads with investors, “Don’t write Microsoft off” just yet. When considering the big tech players that brace to compete in the augmented reality and virtual reality arenas, the analyst sizes up the software giant to be vastly underestimated.
“Typically, when we talk about the future of AR and VR, the first companies that come to mind are Apple, Google, Facebook, and Snapchat; however, Microsoft does not receive enough credit for the strong positioning it has already built,” explains Munster, who highlights, “In the past week, Microsoft has made three important announcements that show the advances it’s making in order to better position itself as a key platform for VR and AR the future.”
In a triple series of upper cut jabs, Microsoft has made it known it’s a viable rival ready to be taken seriously, announcing final Xbox Project Scorpio, Mixed Reality (MR) headsets, and Sprinkles, a photo app for iOS quite comparable to Apple’s recently released social video editing tool Clips.
“Gaming is one of the first areas where VR will have a big impact, and Microsoft is poised to benefit from it,” continues the analyst, concluding, “While Microsoft clearly missed an opportunity in the shift to the mobile computing paradigm, it seems heavily invested in positioning itself as a strong company in the future computing paradigm based on its investments in AR and VR.”
TipRanks analytics demonstrate MSFT as a Strong Buy. Based on 16 analysts polled by TipRanks in the last 3 months, 13 rate a Buy on Microsoft stock, 2 maintain a Hold, while 1 issues a Sell. The 12-month average price target stands at $70.43, marking a nearly 8% upside from where the stock is currently trading.