Does Apple Have a New Hit On Its Hands?

0:05Travis Hoium:Apple has new hardware and may have a hit on its hands. Motley Fool Money starts now.

0:20Travis Hoium:Welcome to Motley Fool Money with the Hidden Gems team. I'm Travis Hoium, joined today by Rachel Warren and Lou Whiteman. And guys, Apple is in the news again. These announcements aren't quite as exciting as they were 15 years ago, but I did think that this new product announcements over the last couple of days were kind of meaningful because this is some new products that could be compelling and we're in this new world of AI. So Rachel, let's start with you. We have new MacBook Pros. We have new monitors. We have a new MacBook Neo, including Airs. I don't know if we need both of those things.

0:59Travis Hoium:What did you take away from all these new products announcement? Do any of them move the needle for Apple?

1:04Rachel Warren:I think it does. So the MacBook Neo, I do think is actually a bit of a shift in Apple's strategy. The idea here is to directly challenge Windows PCs and Chromebooks in that more budget-conscious consumer as well as education sector. So it's$599 for the MacBook Neo,$499 for education clients. It's Apple's most affordable laptop ever. It's about$400 less than the prior generation of MacBook Airs. It's the first Mac to run an iPhone class chip, which is the A18 Pro. It delivers up to 16 hours of battery life. It's capable of on-device AI tasks. So that's pretty cool. The MacBook Air, I think, still has a very clear place in the lineup.

1:46Rachel Warren:It's obviously a higher price than the Neo. And Apple -

1:51Travis Hoium:Yeah, nearly double the price, even just for the lower end model.

1:53Rachel Warren:It is. Well, and that's what's interesting. So Apple has strategically differentiated the prices here to try to avoid total cannibalization. You also see that they actually increased the starting price of the new MacBook Air by$100 to$1 ,099. And the MacBook Air recently was updated with the M5 chip, so you've got much higher CPU and GPU scores. I think this is an interesting move. I mean, the Air is really the mainstream choice if you're a user that needs significant RAM, longer battery life. But then the Neo, Apple's trying to target segments that they maybe had previously ceded to competitors like Alphabet and Microsoft.

2:30Rachel Warren:So I think you look, I mean, these entry tier devices, they're designed to capture millions of iPhone users who maybe have never owned a Mac and maybe they're more budget conscious. And so I do think that there's something to be said for this.

2:42Lou Whiteman:It's so on brand for them to announce a Chromebook killer that is three X more expensive than a lower.

2:50Travis Hoium:Do you think that's really the market that they're going after it? The Chromebook is such an underpowered product. I mean, my kids use it at school. When I saw the Neo, what was exciting for me was this is the first Apple product that I could see. We could, we could actually buy this for the kids and it wouldn't completely break the bank or give, you know, giving them a seven year old PC like we have that ultimately breaks. You know, so it sort of fits a nice category for consumers. Maybe you're right that it doesn't fit in for school.

3:20Lou Whiteman:Well, I mean, I don't think it does, period. I mean, look, Chromebooks right now have 80 percent market share in the K to eight market. Really, I challenge you to go try and get most school systems to change anything about the way they do business, especially something that's going to be more expensive. So, if that was the goal, good luck with that. If it's not the goal, Travis, to your point, is there the risk of cannibalization? If you were trying to reach a new market with this, I think it makes sense. If you're trying to reach an existing market, then yes, maybe you will spur more sales. Maybe it isn't a one-for-one.

3:54Lou Whiteman:Maybe Travis will buy his kid a new device where otherwise your family wouldn't have bought an heir. So, maybe it can expand sales that side. But if you were just adding a lower-cost item to your lineup for your users, then it's not going to be a one-for-one sales game. I mean, look, I think they have intentionally kind of stunted this machine. The 8 gigs of RAM, I think, matter in terms of, you know, you're not really going to get the power users that way, even if they are just kind of using web apps. I don't think this is a problem, but I do think, Travis, to your point, these used to be much more exciting.

4:34Lou Whiteman:The stock is up less than 1 % today. No longer is there visionary on stage in a black turtleneck announcing some brand-new category. We used to talk about Apple cars. We used to talk about Apple TVs. Now we're talking about Chromebook rivals. Apple's a great business with install base, but I don't think anything says more about innovation at Apple 2026 than that.

4:59Travis Hoium:Yeah, we have not heard, at least yet, about the Apple TV. I'm also looking for a Mac Studio because that's what I would consider buying. Lou, I want to push you on one thing. I'm just looking at the financial numbers. I want to take this a little bit in a financial direction, not just vibes on their products. But a vast majority of Apple's sales from a segment standpoint goes to iPhones. So that's really what you need to protect. And then services are actually number two at$113 billion over the past year. So if you're trying to build a moat around the business, that's it. The Mac, only$33 billion worth of revenue.

5:34Travis Hoium:So if something like the Neo just expands that product, gets you using two Apple products instead of one, maybe you add that computer instead of buying a Chromebook or a different tablet for kids, for example. Isn't that enough of a win, even if you're not necessarily setting the world on fire?

5:54Lou Whiteman:What I don't know here, maybe. And I think it can be a win. It's not setting the world on fire. But how much of those incremental sales are people that just otherwise wouldn't have bought something? Or are they at the expense of the iPad or something like that? And so, yes, there's probably add-on. But if you are basically selling an add-on device to an existing user, that's, again, nothing wrong with it. And I don't mean to imply that they shouldn't do this, because I don't think it's strong enough to really cannibalize their sales. And you're right, the iPhone is so important. But again, I think the market has this right, putting the stock up less than 1%, because I think it's just, if any other company did this, if Samsung did this, we wouldn't be talking about it.

6:47Lou Whiteman:It's Apple, so we're talking about it. But I do think we're sort of, again, everyone's living in the past wanting those one more thing days to come back. And there is no sign that they're coming back anytime soon. Maybe later in the year, we'll see something more incredible. But this is very much just mature company does mature company thing.

7:09Travis Hoium:That's true. The other thing we don't have an answer to yet, but something to keep an eye on as an investor is they did not significantly raise prices on most of their products. There's a little tiny price increases, but with RAM costs through the roof, is Apple insulated because they have long-term contracts? Are they going to eat a little bit of that? So margins are going to come down in 2026. We will see how that plays out. When we come back, we are going to talk about the future of AI and the potential that we don't need a new hardware paradigm. You're listening to Motley Fool Money.

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8:41Travis Hoium:Welcome back to Motley Fool Money with the Hidden Gems team. The other topic that I think Apple's new products brings up is what does the future of hardware look like in this AI paradigm? What typically happens, Rachel, is you get some new technology that comes along. It leads to new hardware. Everybody adopts that. And then 10 years or so later, that gets disrupted again. We've seen the PCs. You've seen that with mobile phones. Is this time going to be different where, you know what, AI is proliferating, but we're just going to be using kind of the same devices we were using before?

9:13Rachel Warren:I think the truth is going to be somewhere in the middle. I mean, we're kind of seeing a clash between a couple different trains of thought here. And one is, you know, the idea of hardware revolution, the idea that AI is going to be so transformative that, you know, the screen in your pocket, our smartphones are actually holding it back. And so someone that falls into this line of thought believes that we're heading towards this idea where AI is going to live in smart glasses and wearables. It's going to replace a lot of the devices that we know, say, a company like Apple for. If this wins, obviously Apple's dominance would become more of a mainframe problem.

9:45Rachel Warren:They would own the old world, not the new one. The other kind of train of thought and the one that I tend to more fall into is the theory of hardware refinement. That's what you're seeing Apple move towards with, say, the MacBook Neo, which we were just talking about. Apple's betting that AI is not a new device. It's a super feature that's going to be layered on top of what you already own. I mean, you think about it this way, the internet didn't replace the PC, but it made the PC essential. And I think that Apple is betting that AI follows this path. And I think that what we're seeing with these, yes, not the most exciting announcements we've seen in terms of products, but certainly key innovations that could be growth tailwinds.

10:24Rachel Warren:I think what they're saying is, you know, the hardware doesn't need to change shape. It just needs to be affordable enough for everyone to access the AI layers that they are building in. And one final thing I'll note, you know, Apple specifically, they design the chips, they can process AI locally on your device rather than in the cloud. So for users, that means speed, that means privacy, that can be a massive selling point as and, you know, if AI becomes more personal. So that's kind of what I'm thinking about when I look at this space right now.

10:51Travis Hoium:Lou, does that fly in the face with some of the moves that particularly OpenAI has made? They bought Johnny Ives' company for$6 billion or so. So they seem to be very interested in making a piece of hardware. But is this really just a software layer?

11:06Lou Whiteman:Yeah. I mean, I was going to say, Sam and Johnny disagree. I'm skeptical until I see it because I don't know what that's going to be. But they are very much, I mean, whether or not Sam Altman has incentives to try to say that they have something amazing coming, that's neither here nor there. We'll see what they deliver. AI is off device right now. So it is a layer. There's talk of moving more of it on device. I think all of the data center spending might speak to the realist. Both of these things really can't be true. So I do think a lot of the processing will remain. So it's how are we going to interact with it?

11:42And that is, I think, a problem that's been solved.

11:47Lou Whiteman:Maybe I'm just showing my age. I am very skeptical that what we want is, you know, for primary devices, smaller screens, less visual.

11:57Travis Hoium:Apple started this in this direction, didn't they? You know, even the first iPhone, it was Samsung and companies like that that were making huge screens and Apple was kind of like, ah, we don't want to do that. And suddenly they had to follow suit a few years later.

12:08Lou Whiteman:Well, but I mean, do you really think that that boils down to a screen that's just a little part of, you know, your glasses or something? I'm skeptical about that. I really am. There's some things that audio is good for. There's some things that visual are good for. I do think here that AI has the potential to help us evolve here, better voice recognition, and better just making that actually work. Maybe we don't need keyboards. So, there is incremental change. My guess here is the next five years or so in consumer tech are very similar to the last five years. refinements on existing designs, new complementary devices to supplement, but no huge radical disruption.

12:52Lou Whiteman:If anything, I think there is a threat here, but really what it is is that if AI is everything that they say, does AI become almost the entire device? Does AI become almost everything we interact with? And if so, does operating system matter as much? And that, I think, that is a real long-term threat. I don't think right now, but I think that is the more just interesting twist here than some new form factor that's going to spring up in the next year or two that puts the iPhone at risk. I think the bigger question is, is that does that wall garden fall if we use the operating system less? Yeah.

13:34Travis Hoium:The other question is, are we moving to a world of what you would call thin clients. So where, like you said, the compute is in the cloud, so you don't necessarily need a super powerful computer or mobile device in your hand. You just need something with a good internet connection. So maybe the differentiation point becomes completely different. Yeah. Maybe that does kind of eat away at the operating system. But then again, you have millions of people choosing that operating system and they've been doing that for a very long time. When we come back, we are going to talk about the future of airline stocks.

14:05Travis Hoium:Now that oil prices are up, you're listening to Motley Fool Money.

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14:26Travis Hoium:Welcome back to Motley Fool Money with the Hidden Gems team. All right, Lou, your favorite airlines. Many of these stocks have been on fire over the past few years, at least relative to historical performance. They've optimized pricing. Valuations are relatively low, single digits, price earnings multiples in some cases. But now we have skyrocketing oil prices. Oil's up about 15 % in the past week as we're recording. This conflict in the Middle East could turn us towards a recession. We talked about that yesterday and the potential impact that higher oil and gasoline prices can have on the U.S.

15:00Travis Hoium:economy, which is already kind of in a tenuous spot, especially for, you know, the, let's say, bottom 70 or 80 percent of consumers. What is the bear and bull case if you're looking at airline stocks and seeing these and sort of salivating at these low multiples?

15:14Lou Whiteman:So, first of all, it's worth noting that the actual business effect is very small. United is the largest airline to Middle East, but still, it's less than 2 percent of their seat miles the way we do it. For Delta and American, well less than 1%. There isn't really a business issue here. Oil is what we're watching. Now, it's good to know oil is a level playing field. Nobody is really overly hedged more than anyone else. If your oil cost goes up, if your fuel prices go up, you will feel the pain everyone else does. That should lead to rational pricing. I figure it takes two or three months to pass along higher fares.

15:53Lou Whiteman:The biggest near-term risk with oil is the quarter. Over time, they can adjust to this, but near-term, it could ruin the quarter. For a long-term investor, you shouldn't care about that. What I think you should care about, Travis, and the point you made is, the bigger risk is what this does to the macro. It's not really the cost that these airlines are paying in fuel. It has to do with what the consumer is paying in fuel and other higher costs and whether or not that affects demand. Long-term, the good news here is that all of this restructuring, it used to be that every time there was an oil shock, we'd lose two or three players.

16:27Lou Whiteman:All of these companies, even the weakest ones, are more resilient now. We saw this in COVID. They got some help here. But even they can survive the oil shock. They can't necessarily thrive. I think if you want to buy airlines for the long-term, I'm not sure that's a good idea in general, but I don't think I think I would shy away from the best names in the business because of what's going on. I think I would, as they say in the airlines, buckle up and brace for turbulence.

17:00Travis Hoium:Rachel, when you look at this industry, how do you think about the costs and then the valuations? Because this is a very interesting, different industry today than it was, you know, even 10 years ago, but very, very different than, you know, when I was a kid in the 80s.