Apple unveils its most affordable laptop ever. What the MacBook Neo means for investors

Apple is building a new lineup to attract more users to its valuable ecosystem, a money-minting machine with new hardware as bait and services as hooks. The tech giant announced its most affordable laptop in history with the launch of the MacBook Neo last month. With a starting price of $599, the Neo costs nearly half as much as some of Apple's higher-end laptops. Apple's new MacBook Air 13-inch M5 model starts at $1,099, while the 16-inch MacBook Pro with M5 Max starts at $3,899. All three laptops were introduced during management's three-day hardware meeting in March. The Neo is Apple's most obvious attempt to challenge budget laptops like Google's Chromebook models and entry-level Windows machines, with prices starting at $300 or less. "[Neo] "That's really the core advantage," Chandler Willison, an analyst at research firm M Science, said in an interview with CNBC. Although slightly more expensive, Neo is an attractive option for cash-strapped consumers who need to perform simple tasks like typing, surfing the web, or using AI chatbots. For example, college students are an excellent market. Even Apple serves them through a service. $100 education discount This strategy is nothing new for Apple. Management has spent decades proving the same point to investors: Enter an existing category, build a better mousetrap, and sales and stock valuation will come. The strategy also includes using Apple services, which have higher margins than devices and generate recurring revenue. Apple launched the iPhone in 2007, leveraging the momentum of the iPod and iTunes music store. It was a high-status, niche product at the time, entering a market dominated by the cheaper, ubiquitous BlackBerry. A year later, Apple launched the App Store with the release of the faster iPhone 3G with built-in GPS, and although the initial shift to smartphones posed a risk to Apple's device margins, the gamble paid off with a major industry-changing phenomenon. Just like the keyboard-less iPhone in 2016, this announcement initially disappointed some users. However, Apple was right about this too. In 2018, Apple saw a huge increase in AirPod sales after management's weak launch just two years earlier, strengthening revenues in Apple's wearables segment. headphone market. AAPL YTD mountain Apple (AAPL) year-to-date performance The new MacBook Neo aims to be the latest success on Apple's bedside table. According to Seaport Research, the Neo's upside isn't actually about the increase in device sales in the short term. Instead, it's about attracting more users to its ecosystem over longer periods of time. JPMorgan's Samik Chatterjee is trying to capture the student demographic "very early." The idea was that once buyers graduated, moved on to professional careers, and started earning more, they would already become loyal Apple users and would continue to use Apple's services and upgrade their devices. The increase in Apple products means more revenue for the company's growing services division, which includes revenue from Apple Music, Apple TV, iCloud, the App Store and licensing deals. This segment has become increasingly important to Apple's profitability as it contains more stable, ongoing revenue streams based on Apple's ecosystem as a whole rather than just device sales. Air and Pro models," analysts wrote in a note on Monday. This is a huge untapped opportunity for Apple, according to BofA. It estimates the total addressable market for the Neo could be $32 billion in 2026. If Apple captures about 10% of that market and does so at a 19% operating margin this year, the company could increase its earnings per share (EPS) by 3 cents, analysts said. That's incremental, of course, and Apple could price Neo at $599. These higher memory costs are also expected to reduce worldwide PC shipments by 10.4% in the same period. Additionally, the company's scale ensures priority sourcing and premium pricing for suppliers. "It shows that they are in a more comfortable memory position." [original equipment manufacturer] there. "And so it provides the flexibility to focus on growth right now or market share gains at a time when others are more concerned about maintaining margins," JPMorgan's Chatterjee said. Seaport shared similar thoughts. "We think the company can make up for some of this lost ground with share earnings." Analysts added: "Unlike many of its rivals, Apple has a robust services and subscription business. Many of the new users it gains this year will likely subscribe to Apple's higher-margin services." As a result, the MacBook Neo has created another opportunity for Apple to attract new users to its sticky ecosystem while also increasing revenue for its high-margin services business. This is a welcome development, as the services business is a big reason we like this stock. This is also another example of how Apple isn't afraid to take risks if it means serving its shareholders in the long run. Just look. We view this as a trade-off between the potential short-term hit to Apple's product gross margin and the value of a lifetime Apple user. Apple is expected to announce second-quarter earnings on April 30. Early signs of demand will be helpful, as the product will be available for purchase only two weeks before the end of the quarter. The club has a price target of $300 per share, implying an upside of about 18.5% from Wednesday's close. Jim Cramer said Thursday he thinks Apple shares will rise. Jim also said he was pleased to hear reports that Apple's foldable iPhone had been dropped. AAPL. See here for a full list of stocks.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a transaction alert before buying or selling a stock in his charitable foundation's portfolio. CLUB INFORMATION, NO Fiduciary OBLIGATION OR DUTY SHALL EXIST OR BE CREATED BY RECEIVING ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. THERE WAS NO SPECIFIC RESULT OR PROFIT. GUARANTEED.