Yahoo Finance Profiting from the 3rd Wave of the App Economy
How the Application Ecosystem Came to Be
Several factors have driven the explosion of consumer apps in recent years. Widespread adoption of the Apple (AAPL) iPhone and other smartphones sparked the initial wave of adoption. Rather than using outdated programs like LimeWire for music, people began to use Spotify (SPOT) and iTunes. Instead of clunky GPS systems, consumers shifted toward Alphabet’s (GOOGL) Google Maps. Dramatic improvements in high-speed internet further drove app usage. Now consumers use apps for everything from e-commerce to social media via Meta Platform’s (META) Instagram. Today, the proliferation of app marketplaces and the ease of app development have empowered individuals and businesses to create and distribute their own apps – leading to a burgeoning app ecosystem.
The Next Wave
Virtual Reality
Facebook CEO Mark Zuckerberg made waves on Wall Street when he changed the name of one of the most famous companies in the world to Meta Platforms. Though Facebook generates most of its revenue from its legacy businesses, the name change was a clear sign that the company would be focusing most of its innovative energy on the metaverse and its Quest VR headset.
Not to be outdone, Apple recently announced that it would release a $3,000+ VR headset of its own, the Apple Vision Pro. Tech juggernauts such as Microsoft (MSFT), Cisco (CSCO), and Adobe (ADBE) have already been rumored to be creating apps for the Vision Pro.
Winner: Zacks Rank #2 (Buy) stock Unity Software (U) is a software company that provides a platform for creating and operating interactive, real-time 3D content for gaming. If VR headset usage is to catch on, companies such as Meta and Apple will need VR-centric apps. This is where Unity Software comes in. On June 5th, shares of Unity shot higher by 17% after Apple announced that it would partner with the company for its gaming app needs. The deal is a game-changer (no pun intended) for Unity. Over the past 60-days, Zacks Consensus Estimates have shifted from negative EPS for the coming quarters to positive EPS expectations.
Image Source: Zacks Investment Research
Artificial Intelligence
Nvidia (NVDA) CEO Jensen Huang, who was at the forefront of the internet revolution, recently said that “AI is the most powerful technology force of our time.” AI is likely to disrupt or enhance several industries including the application industry. For example, AI-driven apps can lead to more personalized experiences, a better understanding of human language, improved efficiency, and a better understanding of the human language.
Winner: During MDB’s shareholder meeting yesterday, the company announced that it would launch an AI initiative with Alphabet’s Google Cloud. MongoDb’s Atlas platform helps to streamline the process of creating AI-powered Apps. Because Google is arguably the leader in AI (or right behind Microsoft (MSFT)), the partnership is a massive potential catalyst. Beyond Google, MongoDB is riding the AI wave by helping customers such as General Electric (GE), Toyota (TM), and Verizon (VZ) develop AI-related products.
MDB shares shot higher by 28% on volume that was quadruple the norm after reporting earnings earlier this month. Since then, shares have held the earnings gap and traded tight. The stock is set up for a post-earnings drift trade because of the many fundamental catalysts and the fact that investors with significant gains are in no rush to sell shares.
Image Source: TradingView
Conclusion
The third wave of the application economy will be driven by the onset of VR headsets and Artificial Intelligence. Because of their partnerships with big tech juggernauts, Unity Software and MongoDB are set to benefit the most.
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