rewrite this title and make it good for SEOApple Just Did Something It Hasn’t Done in Over a Year, and the Stock Can Keep Climbing Higher From Here

But the company could deliver strong earnings without capital risk over the next few years, which not only warrants a premium but could also make its current premium appear cheaper than it appears.

There are a few catalysts that could drive earnings (and the stock) higher from here. It starts with the iPhone. Many expect Apple to increase its price this fall, passing on higher component costs to consumers.

It wouldn’t be alone in doing so, as other consumer electronics companies have already raised prices. Users may be more willing to pay up to upgrade their iPhones this fall as it’s finally releasing its AI-powered Siri revamp, which requires newer hardware.

Apple is already finding that its Mac product line is immensely popular among AI enthusiasts, thanks in part to the architecture of its M-series chips. Management has the opportunity to build on that popularity, further develop its chip capabilities, and become the go-to brand for on-device AI development and use. It is also building out its private computing platform with its own chip designs.

Combined with the company’s ability to take complex capabilities and make them easily accessible to consumers, the early attraction of its devices for AI among enthusiasts could set the stage for a huge inflection in demand for its products down the road. As on-device AI capabilities improve, Apple stands to benefit from added service revenue as well, either through the App Store or by selling premium AI services directly.

While the push to build its own computing platform will cut into free cash flow, it remains one of the few megacap companies still producing gobs of cash every quarter. It consistently buys back shares, which in turn helps increase earnings per share.

As Microsoft, Amazon, and Alphabet have poured more cash into AI computing, they don’t have the capacity to offset share-based compensation and decrease outstanding shares. That should naturally produce a gap in price-to-earnings ratios between Apple and the hyperscalers.

As a result, there’s still room for the stock to climb higher from here, but investors will want to pay attention to how customers respond to its higher-priced devices and services later this year.

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Adam Levy has positions in Alphabet, Amazon, Apple, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Apple Just Did Something It Hasn’t Done in Over a Year, and the Stock Can Keep Climbing Higher From Here was originally published by The Motley Fool