Apple CEO Tim Cook Just Passed His Successor a Mess

Apple (NASDAQ: AAPL) CEO Tim Cook conscionable passed his successor an implicit mess. Cook steps down connected Sept. 1 from his relation arsenic CEO but volition stay connected the board. In his place, John Ternus volition presume the relation of CEO. However, the concern Ternus is taking implicit isn't a beauteous one.

What's going connected with Apple that caused this problem? Rising commodity prices.

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Memory spot prices could severely impact Apple's concern

During Cook's past net call, helium stated that rising representation spot prices are undergoing a "100-year flood." Essentially, cipher could person seen this coming, and the effects could beryllium disastrous. He noted that Apple already had to rise prices connected immoderate products, but it whitethorn not beryllium capable to halt astatine conscionable a fewer merchandise lines. If prices proceed to rise, it could unit Apple to rise prices again, alienating immoderate of its user base, which is already stretched thin.

However, Cook noted that it is decreasing costs connected different components that assistance offset rising representation spot prices. We'll spot however this pans out, but if prices proceed to rise, it could get disfigured for Apple and origin John Ternus to woody with a situation conscionable a fewer months into the job.

To marque matters worse, Apple's banal is priced for perfection. For the astir part, Apple has executed astir flawlessly nether Cook's leadership. This has led to a sky-high valuation.

Apple present trades astatine 35 times earnings, careless of whether you usage guardant oregon trailing earnings, indicating zero maturation for the remainder of the existent fiscal year. While 35 times net is already costly enough, erstwhile a banal isn't growing, it seems a spot absurd.

For comparison, the S&P 500 trades for 25.2 times trailing net and 21 times guardant earnings. Nvidia, the institution vying for the rubric of the world's largest institution against Apple, is increasing astatine an awesome 85% year-over-year pace. Yet its banal trades for 34 times trailing net and 24 times guardant earnings, making it look similar a overmuch amended value.

With Apple's banal priced for perfection and a cleanable tempest brewing successful the representation spot market, it could descend Apple's ship. Apple is simply a precise almighty institution with important pricing power, but determination is lone truthful overmuch it tin bash to offset rising representation prices. We'll spot however this plays out, but it volition beryllium a precise hard trial for caller CEO John Ternus implicit the adjacent fewer years.