Apple Can't Dominate Augmented Reality Without This Company

Lou Basenese

Thursday, February 4, 2021

Back in September 2020, I explained that the Age of Augmented Reality [AR] was upon us.

Many were reluctant to believe me. But trends don’t lie: I saw that nearly every major tech company was investing significant capital into developing smart glasses.

And now, in just the last 24 hours, two new pieces of potent confirmation have come to light:

  • First, according to ABI Research, thanks to changes in consumer behavior because of the pandemic and the need for digital transformation, “adoption of AR tools is accelerated.” Simply put, the $12 billion+ AR opportunity is coming much sooner than expected.
  • And second, now Apple Inc. (APPL) is in the mix. As The Information just reported, the world’s largest company is “far along in the design of [its AR] product… It could ship as early as next year, said the person with direct knowledge of the product, who requested anonymity to talk about a device that Apple hasn’t yet publicly admitted it is making.”

So, how can you take advantage of the AR mega-trend that’s now heating up?

Simple: run — don’t walk — to scoop up shares of the top patent holder in the AR space, Vuzix Corporation (VUZI).

This stock is currently under-the-radar. But it won’t stay that way for long. Here’s why…

Going from Perennial Laggard… to Leader

Apple never likes to be the first to launch a new type of consumer electronic device.

Case in point:

  • The iconic iPod came three years after the first MP3 player became commercially available.
  • The even more iconic iPhone launched five years after the first true smartphone.
  • And Apple’s fingerprint reader, Touch ID, came six years after the Toshiba G500 made biometrics on a smartphone a mainstream technology.

But being late to the game never prevents Apple from quickly dominating the market.

After all, what company first comes to mind for each of the new categories above? Apple! And its market share numbers, sales and profits justify its notoriety.

And now, as the AR boom unfolds, the results will be no different.

And that’s where Vuzix comes in…

The Patented Path to Profits

Whereas Apple is still working on developing its tech, Vuzix has been doing so for 20 years. That’s a massive head-start — and it’s paying dividends.

Consider…

Not only is Vuzix’s core waveguide technology at least two years ahead of competitors like Apple and other big tech companies. But Vuzix also boasts a treasure trove of patents and revenues to prove it.

Specifically, Vuzix is sitting on 184 AR patents and counting.

Plus, thanks to management’s wise initial focus on enterprise customers over consumers, sales increased 100% in the fourth quarter to hit a record $4 million.

That bears repeating. Apple hasn’t even left the starting blocks with sales of its AR glasses, and Vuzix is already raking in millions.

If the AR trend keeps accelerating as expected, Vuzix could be operating at a $50 million run rate by the time Apple gets to market.

But I don’t believe the company will ever reach that level of sales. Not independently, anyway.

Why? Because I predict Apple will acquire it before then. It needs to — so it can ensure that Apple’s AR glasses dominate.

The precedent is unmistakable here. Let me explain.

Lather, Rinse, Repeat

When Apple set out to dominate biometric authentication (and in turn, mobile payments) with TouchID, it was forced to buy a small-cap with superior technology: AuthenTec (AUTH).

In July 2012, Apple plunked down $365 million to acquire the patents and hardware necessary to make TouchID a smashing success. And it incorporated the new tech quickly, as it officially launched TouchID in September 2013 with the iPhone 5S.

If Apple follows the same script in AR, here’s what I believe could happen:

It could acquire Vuzix this year, incorporate its superior technology into an Apple AR product, and still launch on schedule before the end of next year.

To be clear, in August 2020, I recommended Vuzix to my paid subscribers at $3.79 per share. Since then, the stock has rallied 218%. It currently trades at about $12.

But plenty of upside remains. After all, Vuzix is still a small company, with a market cap of only $577 million.

In a buyout, it’s easily worth $25 a share or more. But for Apple, that would be chump change, just like the $365 million it paid for AuthenTec was chump change. Keep in mind, Apple is currently sitting on $76 billion in cash.

To investors like us, however, such acquisitions can be game-changing.

I recommended AuthenTec to my readers at around $2.50 per share for precisely the same reason I’m recommending Vuzix. Thanks to its superior technology and patent protection, I believed a takeover wasn’t just likely — it was a necessity.

Apple ended up paying $8 per share, handing switched-on investors a 220% gain.

I expect similar results with Vuzix. So don’t miss out!

Ahead of the tape,
Lou Basenese
Lou Basenese

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