Apple has become a "safe haven" for investors. What advice are analysts offering ahead of the earnings report?
Apple shares haven't been this expensive since 2008 / Photo: Kittyfly/Shutterstock.com
Apple, the maker of the iPhone, will report its results for the fourth quarter of fiscal year 2026 (July–September) after the market closes on November 2—immediately following the sell-off of AI company stocks. Following the quarterly earnings reports released last week, tech giants Amazon, Meta, Microsoft, and Alphabet collectively lost nearly $900 billion in market value. Meanwhile, Apple’s stock fell by only about 1% on Friday, and the company took the title of the world’s most valuable company from AI chipmaker Nvidia.
According to LSEG, analysts expect Apple’s revenue for July–September to grow by nearly 11%, to $113.39 billion, and net income to rise by approximately 6%, to $29.04 billion. Experts note that it is important for investors to understand how long the market will continue to value the company for staying out of the AI spending race, whether it will be able to profit from third-party AI agents, and how many foldable iPhones it will manage to ship in time for the holidays.
The rise in Apple’s stock price is driven by market caution. Apple has fallen noticeably behind its competitors in the development of artificial intelligence, but its stock has outperformed that of AI leaders because investors are playing it safe, according to UBS analyst David Vogt. He himself rates the stock “Neutral” (equivalent to “hold”) due to slowing growth and a decline in gross margin. “The stock is trading as a countercyclical investment in AI, but for how long?” Kiplinger quotes Vogt as saying.
Such a high valuation leaves no room for error. Apple shares are trading at 36 times the earnings expected over the next 12 months—they haven’t been this expensive since 2008, according to Bloomberg. “Right now, the stock is serving as a safe haven, but if growth turns out to be weaker than the market expects, people will feel that it isn’t all that reliable, and we could see a revaluation,” the agency quotes Ben Carey, chief investment officer at Tandem Investment Advisors (the firm holds Apple shares).
Apple’s modest AI spending works in its favor. Morningstar analyst William Kervin believes the company’s strength lies in its decision not to get caught up in a spending race, but rather to integrate AI into its products, according to MarketWatch. According to him, Apple has effectively outsourced the development of AI models to Google by agreeing to use its Gemini AI model, and Apple itself needs to be strong in AI only to the extent “necessary to protect the iPhone ecosystem.”
Revenue from AI could come through the App Store. Investors want to understand whether Apple will be able to earn a share of the revenue generated by third-party AI agents distributed through its app store, says Daniel Morgan, a portfolio manager at Synovus Trust (the company holds Apple shares). The future of Apple’s services business—whose slowing growth is worrying shareholders—may hinge heavily on how Apple implements AI, Reuters notes.
Demand for the Duo is outpacing supply. The first foldable iPhone Duo went on sale on October 23, after the end of the reporting quarter, so its sales will not be included in today’s report. The smartphone sold out in the online store in a matter of minutes. On average, customers have to wait 79 days for delivery, according to Bank of America. IDC analyst Nabila Popal expects demand to continue to outpace supply, despite complaints from some buyers about cracks along the screen’s fold, Reuters reports.
John Turnus, who succeeded Tim Cook as Apple’s CEO on September 1, will host his first quarterly earnings call. Under his leadership, the company has unveiled its first foldable smartphone, its first smart home hub, and its first touchscreen laptops. Many questions at the conference “will focus on plans for new device form factors and what AI capabilities they will feature,” wrote Gil Luria, an analyst at investment bank D.A. Davidson, in MarketWatch.
Analysts are more cautious than investors
The combination of a high valuation and slow growth has dampened Wall Street’s interest in Apple, according to Bloomberg. Since late July, at least six analysts have downgraded the stock. According to The Wall Street Journal, 27 analysts currently have a “Buy” or “Overweight” rating, down from 33 a quarter earlier. The average target price of $334.65 is 2.9% below the latest closing price ($344.63). No other company in the “Magnificent Seven” has a stock price higher than analysts’ average expectations, the agency notes.
On November 2, Nasdaq 100 index futures rose 0.8%, while Apple shares fell 0.2% in premarket trading on the Nasdaq. Investors, however, view Apple as a “safe haven”: since the start of the year, its stock has risen by nearly 27%, outperforming all other members of the “Magnificent Seven.” But Jordan McColl, a senior portfolio manager at Russell Investments (which holds Apple shares), quoted by Bloomberg, would be “stunned” if interest in AI doesn’t flare up again and help chipmakers recover from their decline. When investors are once again willing to take risks for the sake of AI, they will begin to pull out of Apple, McColl warned.
This article was AI-translated and verified by a human editor
