Bernstein reiterated an outperform rating on Apple with a $380 price target. The firm says Apple now trades like a high quality consumer stock rather than a tech peer, which appeals to investors wary of AI stocks.
Apple is starting to appeal to investors seeking a safe haven from higher-risk artificial intelligence stocks, according to a recent Bernstein note. The analysis comes as Jensen Huang's departure from Nvidia rattles the AI trade.
Why Bernstein sees Apple as a consumer stock
Bernstein analysts led by Mark Newman reiterated an outperform rating and a $380 price target, implying about 7% upside from Thursday's close. The firm points to Apple's lack of correlation with tech peers that are spending hundreds of billions of dollars on capital expenditures.
At Apple, capex is less than 2% of revenue. As a result, Apple shares have benefited from the recent AI sell-off, sending the price-to-earnings multiple to all-time highs.
According to Newman: "The market has long decoupled Apple from the rest of the mega-cap tech names", reclassifying it as a consumer compounder.
Valuation compares with Costco and Walmart
Apple's current valuation is 37 times its expected earnings per share for 2027, roughly twice the market's forward earnings multiple. Among companies above $200 billion in market capitalization with consensus future EPS growth below 15%, Bernstein lists Costco at 46 times, Walmart at 39 times, Apple at 37 times and General Electric at 36 times.
Apple's expected annual revenue growth through 2029 is roughly 9%, faster than Costco's 7% and Walmart's 5%. Bernstein's smartphone survey also found that 90% of iPhone users stayed with the brand when replacing a device, similar to Costco's roughly 90% annual membership renewal rate.
Free cash flow returns to shareholders
With an estimated 3.1% FCF yield and stock buybacks equal to 3% of total market capitalization in 2027 and 3.2% in 2028, Apple is expected to return almost all of its free cash flow to shareholders through buybacks and dividends.
Newman said these traits, including predictable replacement demand and steady cash returns, make Apple's earnings more dependable.
Source: CNBC
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