Apple stock outlook under Ternus: AI is key, foldable iPhone a potential catalyst

Apple stock AAPL rose about 3% on Tuesday as John Ternus formally took over as chief executive, marking the company’s first CEO transition since 2011 and opening a new chapter for the world’s most valuable technology company.

The leadership change comes at a pivotal moment for Apple.

Ternus, a 25-year Apple veteran who has led the hardware engineering teams responsible for products including the iPhone, Mac and iPad, takes charge as the company confronts a rapidly changing technology landscape, intensifying competition in artificial intelligence and questions over whether its valuation leaves enough room for further growth.

Tim Cook, who succeeded Apple co-founder Steve Jobs in August 2011, becomes executive chairman after transforming the company from a roughly $350 billion business into one valued at more than $4.5 trillion.

Investors appeared to view the transition as an orderly succession rather than a disruptive change.

Ternus’ long experience inside Apple and his product and engineering background could also prove useful as the company prepares for a potentially important new hardware cycle.

Ternus inherits a strong but demanding Apple

Ternus is taking over a company with considerable financial strength and an enormous installed user base, but also one facing expectations that are difficult to meet.

Apple shares have gained about 21% this year, adding to the enormous wealth creation seen during Cook’s tenure.

The stock has risen 2,258% since Cook became CEO, while its total return including dividends has climbed 2,716%, according to Bloomberg data.

Over the same period, the S&P 500 gained 757% on a total-return basis, while the Nasdaq 100 rose 1,499%.

“Under Tim Cook, Apple has created market cap growth at a rate of roughly $32 million an hour, every hour, for nearly 15 years,” Bank of America analyst Wamsi Mohan wrote in an Aug. 20 report.

Cook’s tenure also saw Apple’s market value repeatedly surpass that of its technology peers.

The company’s weighting in the S&P 500 has risen to about 7%, from less than 3.3% in 2011, and recently approached 7.9%.

Services became a key part of Cook’s legacy

Apple’s business is no longer overwhelmingly dependent on hardware sales.

Services generated more than $109 billion in fiscal 2025, accounting for more than a quarter of Apple’s total revenue.

That compares with about $16 billion in fiscal 2013, when services represented just 9.4% of sales.

The expansion has given Apple a larger stream of recurring, higher-margin revenue and strengthened the broader ecosystem surrounding its devices.

“The push into services is perhaps the most successful thing Cook did, since it is high margin and recurring revenue that is among Apple’s fastest-growing categories,” said Allen Bond, managing director and portfolio manager at Jensen Investment Management, which owns Apple shares, in a Bloomberg report.

Cook also oversaw an aggressive capital-return program.

Apple has spent more than $840 billion on share buybacks since fiscal 2012, according to company data through the first quarter of 2026.

The buybacks have reduced Apple’s outstanding share count by nearly 45% from its 2012 peak, bringing it to its lowest level since 1998.

The question now is whether Ternus will maintain Cook’s relatively disciplined approach to capital allocation or use Apple’s financial resources more aggressively to catch up in areas such as AI.

AI is Ternus’ biggest immediate challenge

Artificial intelligence is arguably the biggest strategic test facing the new CEO.

Apple has faced criticism for moving more slowly than rivals such as Microsoft, Alphabet and Amazon in developing and deploying generative AI technologies.

Ternus’ engineering background could give him greater freedom to push the company toward a more aggressive product strategy, but investors will want to see tangible evidence that Apple can turn AI into a meaningful competitive advantage.

“AI is the single biggest challenge for Ternus. Apple needs to demonstrate that AI will be more than an app on the iPhone, more than Siri,” said Brian Mulberry, chief market strategist at Zacks Investment Management, which owns Apple stock, in a Reuters report.

“Beyond AI, the pressure to continue to remove manufacturing from China without pressuring margins is a tall task to undertake, but part of that process is ⁠already underway,” he said.

Apple’s AI opportunity is particularly important because the company has the distribution advantage of billions of active devices.

The challenge will be turning that enormous installed base into a stronger AI ecosystem without undermining the simplicity and privacy positioning that has helped differentiate its products.

Foldable iPhone could set the tone

Ternus will not have to wait long for his first major test.

Apple’s September 9 product event will be his first major iPhone launch as CEO and is widely expected to feature the iPhone 18 lineup, potentially including the company’s first foldable iPhone.

The launch could provide an early indication of how aggressively Apple intends to refresh its hardware portfolio under the new leadership.

The company has already shown signs of product momentum.

In late August, Apple unveiled new Mac mini models powered by its first 2-nanometer M6 chip.

A successful premium foldable could provide another growth opportunity for Apple while helping it compete more directly in a category where rivals have already established products.

Rothschild & Co. Redburn has become particularly optimistic about that opportunity.

The firm upgraded Apple from “Neutral” to “Buy” on Aug. 17 and raised its price target to $400 from $260, citing confidence in the next product cycle and a revamped AI strategy.

This reflects a 23% upside from Apple's current trading levels.

The firm views Apple’s expected entry into the premium foldable smartphone market with the iPhone Ultra as one of the company’s biggest potential catalysts.

Valuation leaves little room for disappointment

The bullish outlook, however, is already reflected to some degree in Apple’s share price.

Rosenblatt raised its price target to $303 from $300 while retaining a Neutral rating.

The firm’s target implies downside from current levels and highlights the valuation challenge facing Apple.

The company trades at a price-to-earnings ratio in the 30s, compared with a 10-year average of about 23.

Rosenblatt’s $303 target is based on a multiple of 31 times estimated fiscal 2027 earnings, which it considers a healthy premium to Apple’s low double-digit EPS growth rate.

Apple’s valuation is therefore substantially higher than it was when Cook took over.

Source: Bloomberg

The stock traded at about 12 times earnings in 2011.

That has created a growing divide on Wall Street.

Of the 58 analysts tracked by Bloomberg who cover Apple, 34 have buy ratings.

That is considerably less bullish than sentiment toward other megacap technology companies, including Microsoft, Nvidia and Amazon.

For Apple, the concern is not necessarily that its business is weakening, but that its stock price may already assume a considerable amount of future success.

Ternus could change Apple’s investment strategy

The transition could also bring a change in Apple’s willingness to invest.

Bank of America’s Mohan has suggested that Apple’s move away from its previous net-cash-neutral objective could indicate a period of higher spending on research and development, capital expenditure and potentially larger acquisitions.

That could become particularly important as Apple tries to accelerate its AI capabilities.

A greater willingness to spend would represent a notable shift from the financial discipline that characterized much of Cook’s tenure.

“The latter two have not been emphasized in the Tim Cook era but AI could require Apple to move with a higher rate of change,” Mohan wrote.

That does not necessarily mean Apple will abandon the capital-return model that has rewarded shareholders.

Rather, Ternus could face a balancing act between funding new technologies and maintaining the financial discipline that helped drive Apple’s extraordinary stock-market performance.

The Cook era sets a difficult benchmark

Cook leaves behind an unusually high standard.

Apple’s transformation under his leadership was not driven by a single revolutionary product comparable to the original iPhone.

Instead, he expanded the existing ecosystem, improved supply-chain efficiency, built out services, and used enormous cash flows to return money to shareholders.

“While he isn’t the visionary showman that Jobs was, or as product-focused, everything he did was to bolster Apple’s ecosystem and operations, which was a very effective way of increasing the company’s value,” Bond said.

“The stock performance reflects that success.”

Now Ternus must demonstrate that Apple can generate another phase of growth without relying solely on the existing iPhone franchise.

AI, foldable devices, services, manufacturing diversification and potentially higher investment will define the early years of his tenure.

The September iPhone event will offer the first major glimpse of that strategy.

For investors, however, the bigger question is whether Ternus can create enough new growth to justify a stock valuation that is already well above Apple’s historical norms.

The transition may be orderly. The expectations surrounding it are anything but.