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By Rob Lenihan, TheStreet.com
Luca Maestri is a true believer.
Apple's (AAPL) chief financial officer shared his feelings about the tech giant with analysts on Aug. 1.
“We continue to believe there is great value in our stock and maintain our target of reaching a net cash neutral position over time,” Maestri said during the company's fiscal-third-quarter-earnings call.
Apple had just posted stronger-than-expected earnings and the group was preparing to launch a host of AI-themed initiatives heading into the release of its iPhone 16.
Earnings climbed 11.1% from a year earlier to $1.40 a share, firmly topping Wall Street’s consensus forecast of $1.35. Revenue rose 4.9% to $85.8 billion, a June-quarter record that again topped the analyst consensus estimate of $84.36 billion.
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Maestri told analysts that “we look at the environment, and we know that this has been an uncertain period for the last few quarters.
“We’re very pleased with our ability to decelerate some of the expense growth, taking into account the overall macro situation,” he said. “We will continue to manage deliberately. You can see that we continue to grow our R&D costs faster than the rest of the company.”
And now Maestri, 60, will stepping down from his role as CFO as of Jan. 1. Kevan Parekh, currently vice president of financial planning and analysis, takes over.
“Luca has been an extraordinary partner in managing Apple for the long term,” Chief Executive Tim Cook said in a statement. “He has been instrumental in improving and driving the company’s financial performance, engaging with shareholders, and instilling financial discipline across every part of Apple.”
Apple executive change comes at crucial time
Parekh has been with Apple for more than a decade and will join the company's executive committee. Prior to working for Apple, he held senior leadership roles at Thomson Reuters (TRI) and General Motors (GM) .
Maestri, who has been CFO since 2014, will continue to lead the corporate services teams, including information systems and technology, information security and real estate and development, reporting to Cook.
The C-suite shakeup comes at a crucial period for Apple. The tech giant just set Sept. 9 as the date for its next series of product launches with invitations stating “It's Glowtime.”
There are high expectations to see how artificial intelligence — or Apple Intelligence as the company calls it — is integrated into the Apple ecosystem.
The company has lagged many of its peers by not fully unleashing the power of AI, but analysts expect that to change with what is being called the biggest-ever software upgrade for the iPhone.
On-device AI integrations are expected to reverse the downtrend in smartphone sales and drive the next major upgrade cycle, particularly for Apple’s iPhones, according to Global X EFTs.
As consumers increasingly embrace AI technology, various devices across multiple industries will require upgrades to integrate AI capabilities.
So, will the CFO changeup have a massive impact on the Cupertino, Calif., company's AI-influenced future? Most analysts don't think so.
“While some may quibble or ask, ‘Why now?’ the reality is Parekh has worked alongside Maestri for roughly a decade, which means the odds of any meaningful change in Apple’s financial execution and capital discipline are likely to be minimal,” said TheStreet Pro’s Chris Versace.
“We see no real reason to complain, but we also wouldn’t mind Apple growing its annual dividend at a slightly faster pace than it has been,” he added.
Wedbush analyst Dan Ives, who has an outperform rating on Apple with a $285 price target, said he expected a very smooth transition as Parekh “takes the baton from Maestri.”
“Parekh is an Apple insider that has been trained for this role over the years and we expect a seamless CFO transition in Cupertino,” he said.
In a note to investors, Ives said Apple sent out invites for its Sept. 9 iPhone 16 launch in Apple Park, “which we believe will kick off Cupertino's biggest upgrade cycle in its history with AI now on the doorstep.”
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Analyst sees ‘historic upgrade cycle'
Global iPhone sales — which make up half of Apple’s total revenue — were down last quarter due largely to weakness in China. But Ives said his team is getting some good vibrations from the Asian market.
“We are seeing more indications across the Asia supply chain over the past few weeks [that] this iPhone upgrade cycle could be a historical one, setting the stage for a supercycle as currently we estimate roughly 300 million iPhones globally have not upgraded in over four years,” Ives said.
“In our view Apple could sell north of 240 million iPhone units in fiscal 2025 as this AI-driven upgrade cycle takes hold,” he said.
Ives said that AI technology being introduced into the Apple ecosystem will enable it to monetize opportunities both in services and iPhone/hardware. He said the move could add $30 to $40 a share and result in Apple reaching a $4 trillion-plus market capitalization.
Piper Sandler's Farrell weighs in on Apple
Piper Sandler analyst Matt Farrell said that Apple filling the CFO role with an internal candidate should make the transition a bit smoother, particularly given Parekh's experience at the company.
However, any change of this magnitude does create some level of uncertainty, especially given the consistency and the history of execution from Maestri, Farrell said.
The analyst said that he didn't expect any material strategic pivots as part of the transition, but he'll be listening for any incremental takeaways on the company's September-quarter earnings call in late October or early November.
Melius Research said that it had expected that a CFO change at Apple could happen soon, noting CFOs don't typically do it longer than 10 years “just about anywhere.” Maestri just celebrated his 10-year anniversary as the computer maker’s top financial executive.
Apple “methodically groomed” Parekh and “here probably is no better time to do this than now” as the company enters a multiyear upgrade cycle for iOS devices, the firm said.
Melius, which affirmed a buy rating on Apple shares with a $265 price target, said that Maestri staying on to lead Corporate Services is “likely to make sure things go off without a hitch.”
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