Tim Cook Will Host His Last Earnings Call as Apple CEO on July 30. Is the Stock a Buy Now?

Longtime Apple (NASDAQ: AAPL) CEO Tim Cook will host his final earnings conference call after the bell on Thursday, July 30. While Cook was not the same type of innovator as his predecessor, Apple founder and legendary CEO Steve Jobs, he did a great job of nurturing Apple's core strengths. He will leave as Apple is the largest company in the world, with a market cap of $5 trillion. The question, though, is whether the stock is still a buy with him ready to depart.

Apple CEO Tim Cook. Image source: Apple.

Apple has a great business

When Apple reports its fiscal third-quarter results, investors should expect much of the same. iPhone sales should be solid, with the company reportedly seeing a 3% increase in shipments during the quarter and gaining its highest-ever global market share at 20%, according to Centerpoint Research. This should then feed into its high-margin service revenue, which has consistently grown at a mid-teen rate.

Cook leaves Apple as having one of the best business models on the planet, making it easy for its next CEO to get off to a running start. The beauty of Apple is its closed ecosystem, which helps lock in customers. Once someone buys an iPhone, the cost of switching becomes increasingly difficult with each photo taken, subscription bought, and app downloaded. Users then become a part of Apple's huge service revenue machine. Apple is getting a high-margin revenue stream every time someone clicks on a search ad (as it gets a 36% revenue cut from Alphabet's Google), uses Apple Pay, buys cloud storage, or purchases a subscription or app.

Meanwhile, Apple just increased prices for several devices and certain service plans. This should be a nice revenue driver in the coming quarters after Cook leaves, giving incoming CEO John Ternus a solid revenue tailwind as he takes the reins. Ternus will also have time to execute a more comprehensive AI strategy for the company. That said, I wouldn't be surprised if Cook's decision to sit back and not throw huge amounts of money into chasing AI models proves to be a smart one.

Is Apple stock a buy?

While I think Apple is one of the best companies in the world, I would not be buying the stock right now. The stock's valuation has expanded dramatically, and it now has a forward price-to-earnings (P/E) ratio of over 35 times. Its trailing P/E of 41 times is now more than double the multiple it traded at before the pandemic. Meanwhile, it could face some margin pressure from increasing memory prices.

Given that valuation still matters, I'd wait for a better entry point before considering buying the stock.

Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Apple. The Motley Fool has a disclosure policy.