Apple's Foldable Phone Has Arrived. Here's Why I Don't Think It'll Send the Stock Soaring
Key Points
Apple's new iPhone Duo recently launched, and it isn't cheap.
The phone's premium price point could give consumers second thoughts about buying it early.
The stock trades at a high valuation, and expectations may be elevated for the Duo.
Apple (NASDAQ:AAPL) recently unveiled its new iPhone Duo, a foldable phone priced at a whopping $1,999 — and that’s the starting price. The phone is priced at a premium for a company already known for premium-priced products.
If sales for the Duo take off, it could prove to be a massive growth catalyst for the business. But here's why I wouldn't hold my breath, and why I think there could be challenges ahead for the tech company.
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Why consumer demand may not be that strong for the Duo
The Duo may look enticing to consumers who love Apple products or foldable phones, but I don't think it'll capture a huge subset of the market, at least not right away. There have been many issues with foldable phones in the past, including screen creases after prolonged use, and repair costs can be high.
At such a high price, the Duo may simply be too expensive given the uncertainty and risk. Plus, Apple has been slow in rolling out artificial intelligence (AI) features, and there may also be an incentive for consumers to wait, not only to see that there aren't hardware-related concerns with the new phone, but also to wait for new AI capabilities that may be specific to the Duo.
Consumers would be taking on significant risk at this price point, at a time when economic conditions aren't ideal. And many people have been holding off on upgrading their phones due to rising costs. While I don't doubt there will be some strong initial demand for the Duo from Apple's most devoted customers, I don't think it'll be a game changer for the business -- and that could be bad news for the highly valued stock.
Apple's stock looks wildly overpriced
There's been a fire lit under Apple's stock recently. At the beginning of the year, it looked like it might be a bad year for the stock, as it remained in negative territory until around May. And now, it's up more than 20% year to date, with its market cap at around $5 trillion, making it the most valuable company on U.S. markets outside of Nvidia.
But I'm not sold on the stock at its current valuation, as it trades at 38 times its trailing earnings. That kind of multiple is excessive for a business that typically generates only modest, often single-digit, growth. If the Duo doesn't do well, the stock could give back some of its recent gains.
Apple stock remains a solid investment for the long haul, but investors shouldn't be surprised if it struggles in the short term, as its high valuation could put pressure on the company and weigh down the stock.
David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Nvidia. The Motley Fool has a disclosure policy.