Apple shares rose 0.99% on Friday, even as broader technology stocks came under pressure following Nvidia’s decline.
The iPhone maker is increasingly attracting investors seeking exposure to a relatively defensive technology business amid uncertainty surrounding artificial intelligence (AI) stocks, according to Bernstein analysts.
In a report published Thursday, Bernstein analysts led by Mark Newman said Apple had become less correlated with its large-cap technology peers and was increasingly trading alongside high-quality consumer companies.
“With little correlation to tech peers, Apple now trades in line with high quality consumer stocks,” the analysts said.
The assessment comes as Nvidia faces leadership uncertainty following reports surrounding CEO Jensen Huang, while concerns about the substantial capital expenditure requirements of AI infrastructure continue to weigh on technology stocks.
Apple gains safe-haven appeal as AI spending weighs on tech
Unlike several other Magnificent Seven companies, Apple has relatively modest capital expenditure requirements.
Its capital expenditure accounts for less than 2% of revenue, compared with the hundreds of billions of dollars being committed by major technology companies to AI infrastructure.
Bernstein described Apple as a consumer compounder, noting that its revenue growth, earnings generation and free cash flow profile increasingly resemble those of established consumer businesses.
The brokerage reiterated its outperform rating on Apple and maintained a $380 price target, implying approximately 7% upside from Thursday’s closing price.
Apple trades at around 37 times its expected earnings per share for 2027, roughly twice the broader market’s forward earnings multiple.
Among companies with market capitalizations above $200 billion and expected EPS growth below 15%, only Costco, Walmart and General Electric also trade at forward price-to-earnings multiples above 30.
However, Apple’s projected annual revenue growth through 2029 is approximately 9%, compared with 7% for Costco and 5% for Walmart.
Bernstein also highlighted Apple’s estimated 3.1% free cash flow yield and expected share repurchases equivalent to 3% of its market capitalization in 2027 and 3.2% in 2028.
iPhone demand and services offer growth opportunities
Apple’s operating performance continues to provide support for its valuation.
In the fourth quarter of fiscal 2026, iPhone revenue increased 17% year over year to $57.6 billion, despite supply constraints.
The company reported September-quarter revenue records for iPhone and record upgrades worldwide, including in the US, China and India.
The launch of iPhone Duo, alongside the iPhone 18 Pro and Pro Max, has expanded its product portfolio and created additional upgrade opportunities.
AI also represents a potential growth driver.
Apple’s planned improvements to Siri, including personalized assistance and contextual awareness, could encourage customers to upgrade to newer devices.
The company may also generate additional revenue by offering expanded access to advanced server-based AI capabilities.
Its Services business provides another monetization opportunity.
With more than 2.5 billion active devices worldwide, Apple has a substantial installed base for services such as Apple Pay, iCloud+, Apple Music and Apple TV.
The expansion of bundled services and the introduction of Apple Pay in India and advertising on Apple Maps could support further growth.
Rising memory costs and supply constraints pose risks
Despite its defensive characteristics, Apple faces several operational challenges.
The company expects gross margin to decline to 45%-46% in the first quarter of fiscal 2027, compared with 47.9% in the fourth quarter of fiscal 2026.
Rising memory prices and expenses related to Siri AI are expected to contribute to the decline.
Apple also continues to face supply constraints involving advanced semiconductor manufacturing capacity and memory components.
While advanced-node constraints are easing, memory shortages could affect Mac and iPad availability during the December quarter.
Regulatory scrutiny of its App Store business model and third-party licensing arrangements presents another risk.
Apple expects Services revenue growth to moderate to 8%-9% in the first quarter of fiscal 2027, compared with 10% in the preceding quarter, partly reflecting licensing-related and foreign-exchange headwinds.
These pressures could test Apple’s ability to sustain its premium valuation even as investors increasingly view the company as a defensive alternative within the technology sector.
AI disclosure: AI tools assisted with research and drafting of this piece. An Invezz editor reviewed the facts, sources and wording before publication. Any opinions or analysis are Invezz’s, not those of an automated system.
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