Apple (AAPL): A Major Product Launch Could Open Its Next Chapter
Apple (AAPL) enters September with something investors haven’t seen in years: a new CEO and the possibility of an entirely new iPhone category.
John Ternus took over as CEO on Sept. 1 after Tim Cook stepped down and became executive chairman. Now, just eight days into Ternus’ tenure, Apple is scheduled to unveil its latest products on Sept. 9. The biggest question is whether the event will include the company’s long-rumored foldable iPhone.
We think a foldable could give Apple an important new growth opportunity. Foldable devices currently account for only about 2% of the smartphone market, leaving plenty of room for the category to expand. Apple has a history of entering product categories after competitors and using its ecosystem and enormous customer base to its advantage. A compelling foldable iPhone could help retain existing users while giving customers another reason to upgrade.
But our investment case doesn’t depend on what happens at the Sept. 9 event.
Apple’s underlying business has been gaining momentum. In its fiscal third quarter ended June 27, revenue increased 16% year over year to $109.4 billion. Earnings grew even faster, with EPS rising 29% to $2.02.
That performance is particularly encouraging because it shows the iPhone can still produce meaningful growth. And Apple has more than 2.5 billion devices in its installed base, giving the company a massive audience for its growing lineup of subscriptions and other services. As the higher-margin services business expands, it also has the potential to lift Apple’s overall margins.
Then there’s Apple’s financial firepower. The company generated $136.68 billion in free cash flow over the trailing 12 months, up 38.4% year over year. That gives Apple enormous flexibility to invest in areas such as artificial intelligence and new products while continuing to return capital to shareholders through buybacks and dividend increases.
Apple trades around $316 per share. The stock remains below its 52-week high of roughly $345, and recent concerns about supply constraints have weighed on shares despite the company’s strong financial results.
The Sept. 9 product event could provide an immediate catalyst, particularly if Apple finally introduces a foldable iPhone. But we’re more interested in the bigger picture. Revenue growth has accelerated, earnings are rising even faster, the installed base exceeds 2.5 billion devices, and free cash flow has climbed more than 38%.
A successful new product category would add another growth driver to an already strong business. With a new CEO taking the reins and one of Apple’s most anticipated product events arriving on Sept. 9, we think this is an attractive time to own the stock.
