During an interview with CNBC, Craig Moffett said Apple has increasingly been viewed as the “safe choice” among mega-cap stocks, helping drive a significant valuation premium.

  • Moffett said Apple’s appeal as a relative safe haven has been playing out for months, pushing the stock’s valuation to levels that leave less room for disappointment.
  • At roughly 36 times forward earnings, Apple’s earnings yield is only about 2.8%, he noted, which is roughly half the yield available in the Treasury market.
  • According to Moffett, the question heading into earnings may not simply be whether Apple delivers another solid quarter.

Apple Inc. (AAPL) heads into its fiscal fourth-quarter (Q4) earnings report with its stock near record levels and investors closely watching whether the company can sustain its momentum. However, MoffettNathanson co-founder and senior analyst Craig Moffett sees a less obvious risk emerging for the iPhone maker.

During an interview with CNBC, Moffett said Apple has increasingly been viewed as the “safe choice” among mega-cap stocks, helping drive a significant valuation premium. But with the stock trading at roughly 36 times forward earnings, he questioned whether investors have already priced in too much optimism.

Apple shares ended with a decline of more than 1% in Friday’s regular trade, but edged up by 0.1% in the afterhours session.

Apple’s ‘Safe’ Trade May Have Gone Too Far, Says Moffett

Moffett said Apple’s appeal as a relative safe haven has been playing out for months, pushing the stock’s valuation to levels that leave less room for disappointment.

At roughly 36 times forward earnings, Apple’s earnings yield is only about 2.8%, he noted, which is roughly half the yield available in the Treasury market. That makes the valuation particularly notable for a company whose shares have already rallied sharply this year by about 27%.

“It’s already priced in so much safety that you wonder whether it’s overshot somewhat,” Moffett said.

He pointed to Friday’s trading action as another potential warning sign, with Apple stock declining even as money flowed out of other mega-cap technology stocks, raising the possibility that investors could increasingly favor companies offering more attractive free-cash-flow or earnings yields.

According to Moffett, the question heading into earnings may not simply be whether Apple delivers another solid quarter. It is whether the company can produce enough growth to justify the premium investors are already paying.

Apple is set to report its Q4 results on Monday after the closing bell. Wall Street expects Apple to report earnings per share (EPS) of $1.98 on revenue of $113.25 billion, according to Fiscal.ai data.

Moffett Says Apple’s Biggest iPhone Threat May Be Device Users Already Own

Moffett also highlighted a more fundamental challenge for Apple as higher memory costs push up device prices.

He said higher memory costs have already lifted prices by about $100 across Apple’s base devices. U.S. wireless carriers, meanwhile, have not meaningfully increased promotions to offset those higher prices, meaning consumers are ultimately paying more, Moffett noted.

That creates a potentially bigger problem for Apple than losing customers to Android.

“The competition that Apple faces is from the Apple device that you already own,” Moffett said.

If consumers look at a new iPhone, see a higher price and decide their existing device still works well enough, they may simply delay upgrading, he said.

Moffett added that existing iPhones remain capable, run current software and can stay in use for years. As a result, higher prices could encourage consumers to stretch the replacement cycle, creating what Moffett called the “inertia” of the existing device.

Munster Remains Bullish On AAPL’s iPhone Duo

Last week, Deepwater Asset Management’s Gene Munster outlined his bullish outlook on Apple’s new iPhone Duo, forecasting 20 million units in FY27 versus Wall Street’s roughly 12 million estimate.

Munster expects the higher-priced device to add about $8 billion to the Street’s current FY27 iPhone revenue estimate of $279 billion.

He sees the Duo accounting for 8% of iPhone unit sales and 16% of revenue in FY27, well above Wall Street’s estimates of 4% and 7%, respectively.

Munster also expects Apple’s overall iPhone business to grow 13% in FY27, compared with the Street’s 10% forecast.

What Retail Traders Think Of AAPL Stock

Retail sentiment on Stocktwits around Apple trended in the ‘extremely bearish’ territory at the time of writing.

AAPL stock is up 27% year-to-date and over the past 12 months. The S&P 500 ETF Trust (SPY) is up 11% over the past 12 months, while the Invesco QQQ Trust (QQQ) is up 12%.

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