High demand for Apple’s latest MacBook could be a good sign for the stock, despite the product’s low price.
Apple CEO Time Cook said in a post on X Friday morning that “Mac just had its best launch week ever for first-time Mac customers.” This announcement came after the tech giant released a new lineup of laptops, including the all new MacBook Neo and updated models of the MacBook Air and MacBook Pro.
While Cook didn’t specify further, it isn’t hard to guess which of the new MacBook models is selling like hot cakes. A quick search on Apple’s website shows that Neos are sold out and won’t be available for in store pickup until the middle of April. Air and Pro models are available for in store pickup today.
That’s not surprising, especially when looking at what’s happening in the broader hardware environment. The Neo starts at $599, which is significantly less expensive than other MacBooks. That’s a price comparable to computers from companies like HP Inc., Dell Technologies, and Lenovo, which are raising prices to offset the surging cost of memory.
On the surface, strong demand for any product seems like a positive for Apple. But investors might be concerned about margin pressures as the product that’s doing so well is so cheap. This is even more of a concern now as the high cost of memory is pressuring margins across the tech hardware space.
Experts aren’t worried.
“I view the recent launches of Mac products as a major success for Apple near-term and medium-term,” Oppenheimer analyst Martin Yang told Barron’s on Friday. “Neo may have slightly lower-than-average margin comparing to other Mac products, but I don’t think margin headwind is large enough to be notable on Apple’s consolidated income statement.”
Yang added that the Neo also offsets potential memory cost increases by using an A18 chip, which has been used in iPhone 16 models.
Ryan Reith, group vice president for IDC’s Worldwide Device Tracker suite, told Barron’s that he thinks the Neo launch could be a way for Apple to gain market share among budget conscious consumers, especially while the rest of the industry faces demand headwinds as it raises prices due to rising memory costs.
Growing share in the PC market could be incredibly positive for Apple moving forward. The Apple ecosystem is quite sticky. Apple devices are designed to easily integrate with each other. Once people get their hands on one Apple product, they tend to buy more. So while a customer purchasing a MacBook Neo gives the company less money than if they bought an Air or Pro, it introduces the likelihood of that customer purchasing other Apple products down the line.
Reith also pointed out that bringing customers to MacBooks for the first time introduces them to Apple services, the highest margin part of the business. The services segment includes the App Store, iCloud, and Apple Music, among other subscriptions. Fiscal first-quarter services gross margin was 76.5%, compared with products gross margin of 40.7%.
Apple also reported first-quarter Mac revenue of $8.4 billion and services revenue of $30 billion.
“Everyone for how many years now was talking about Apple services growth, Apple services growth. And I know there’s been some bumps in the road, but everybody that they bring in or maintain in their ecosystem, that’s what’s behind their services growth,” Reith said.
Increased sales and an increase of new customers into Apple’s high margin services segment could possibly lead to more investor optimism. Apple stock could use the boost, with shares down 8.7% this year.
Introducing a low priced laptop while the industry struggles with costs was a risky move. Evidence points to it paying off.
