The Zhitong Finance App learned that in the context of the recent sell-off of AI concept stocks, Apple (AAPL.US) is regarded by the market as a “safe haven” among technology stocks due to its extremely low capital expenditure and low dependence on AI servers, and its price-earnings ratio (PE) has been pushed to an all-time high as a result. Bernstein released a research report that thoroughly analyzed the rationality of Apple's 37x forward-looking price-earnings ratio and maintained the stock's “outperforming market” rating. The target price was 380 US dollars.
Why is Apple viewed as a “safe haven” for tech stocks?
The research report points out that Apple's capital expenditure accounts for only about 2% of revenue, and is hardly affected by the AI arms race. Apple chose to cooperate with Google to develop its “Apple Basic Model” (AFMs), and when Siri AI was launched, many AFMs were run on the device side, thereby drastically reducing the reliance on expensive AI servers.
This asset-light model not only protects Apple from the possible decline in AI data center capital expenditure (currently plaguing upstream semiconductors and storage stocks), but also avoids the risk of shrinking free cash flow currently faced by hyperscale cloud vendors. Furthermore, Bernstein believes that if the AI bubble actually bursts, Apple may benefit, such as buying troubled cheap assets at a very low cost.
Safe-haven status pushes up valuations: relative price-earnings ratio hits record high
This “safe haven” attribute has directly pushed Apple's valuation to an extreme value in history. Currently, Apple's valuation is 37 times the expected earnings per share for the 2027 calendar year (the highest in history), and its relative forward-looking price-earnings ratio has reached 2.0 times that of the S&P 500 index (also the highest in history).
Bernstein pointed out that among the US listed companies with a market capitalization of more than 200 billion US dollars and a future consensus earnings growth rate of less than 15% per share, only four companies have a forward-looking price-earnings ratio of more than 30 times: Costco (46 times), Walmart (39 times), Apple (37 times), and General Electric (36 times).
Decoupled technology stocks, Apple starts pricing “high quality consumer stocks”
According to the research report, the market has already decoupled Apple from large technology stocks and reclassified them as “defensive compound interest assets.” The research report points out that in the current large technology stocks, the linear correlation between price-earnings ratio and revenue/profit growth has greatly weakened. And Apple is the ultimate expression of this phenomenon: it is growing at a rate close to the bottom of the sector, yet it enjoys a valuation at the top of the sector (37 times). For example, the expected price-earnings ratio of Google and Meta in 2027 is only about 17-19 times, and Microsoft's is 24 times. They are both higher or equal to Apple in terms of revenue and profit growth, but their valuation multiples are significantly lower than Apple's.
In contrast, Apple's valuation characteristics are closer to high-quality consumer stocks. In the consumer necessities, large-scale retail, and luxury sectors, the price-earnings ratio is usually positively correlated with the growth rate. Apple's current forward revenue growth rate (9%) is actually the fastest in this group; its 3.0% free cash flow yield and about 3% share repurchase plan mean it has returned almost all of its free cash flow to shareholders. Bernstein believes that compared to Costco (46 times) and Walmart (39 times), Apple's 37x valuation is even more cost-effective.
Is 37x price-earnings ratio outrageous? Customer loyalty and cash flow support premiums
Faced with the question “whether Apple's valuation is too high,” Bernstein thought it was not outrageous. The reason is that Apple has four major characteristics similar to consumer necessities stocks:
Demand visibility is high: Apple has a large base of about 1.4 billion active iPhone users, a switching cycle of about 4 years, and recurring service revenue accounting for about 40% of gross profit, making its revenue and profit for the next year highly visible.
Extremely high user loyalty: According to the survey, iPhone users have a 90% brand retention rate. Based on a 3-4 year switching cycle, Apple's annualized retention rate is about 96%-97%, which is even higher than Costco's 92.3% (US and Canada) membership renewal rate.
Strong pricing: iPhones are the least price-sensitive of mainstream smartphones. Its price elasticity is around 1.3, which is far below the average of 2.5 for other mobile phone manufacturers.
Stable shareholder returns: In fiscal year 2026, Apple returned approximately $102 billion to shareholders through repurchases and dividends. With around $57 billion in net cash and $136 billion in free cash flow, Apple is able to continue to repurchase shares equivalent to about 3.0% and 3.3% of its market value in the 2027 and 2028 fiscal years.
Furthermore, Apple has strong profit stability. Of the 44 quarters in the past 10 years (starting from the first quarter of FY2016), its earnings per share exceeded sellers' expectations for 40 quarters, falling short of expectations in just 2 quarters. Bernstein believes that the premium given to Apple by the market partly reflects its rare “profit without thunderstorm” characteristic.