Apple (AAPL +0.07%) is undergoing a transition. CEO Tim Cook is stepping down from his position, and John Ternus will be taking over in September. It's a monumental move for the business, and it could mark a significant shift in its strategy moving forward.
While it may not be clear how the business may be different under Ternus, the company may have dropped a big hint as to how its growth strategy may change on its recent earnings call.
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Could Apple be more aggressive on M&A?
Apple's growth strategy hasn't been particularly aggressive in mergers and acquisitions (M&A), making only modest deals. It's largely relied on building out its own ecosystem and generating more revenue from existing customers. However, now with many investors demanding more from its artificial intelligence strategy, there may be more pressure for it to make a big move, especially given its growing cash pile. As of the end of March, Apple's cash and marketable securities totaled a combined $68.5 billion.
On its second-quarter earnings call, its CFO Kevan Parekh said that the tech company is going to "make more optimal economic decisions around how we best utilize our debt and cash portfolios to support the business." Previously, the company's goal was to be net cash neutral. Analysts believe this can be an early indication of a renewed focus on not just an increase in capital expenditures, but potentially, a much more aggressive M&A strategy.
NASDAQ: AAPL
Key Data Points
Many question marks loom over Apple's business these days
Given the timing of these comments, with a new CEO taking over in September, it sets the stage for Apple potentially being much more growth-oriented and aggressive than it has been in the past. But simply acquiring other businesses isn't a recipe for success; the moves have to make sense and be accretive to the bottom line for them to pay off in the long run.
While it may be exciting to hear that the business may be more open to making big deals in the future, now may be a good time to be cautious with Apple's stock. It's already one of the most expensive companies in the world, with a market cap of $4.3 trillion. Expectations are going to be high, and it may not be easy for the stock to generate significant returns at this valuation.
I'd hold off on buying Apple stock, at least until there's more clarity from Ternus about the company's strategy and any potential deals on the horizon.
