Apple Inc. (NASDAQ:AAPL) stock fell more than 4% in premarket trading Tuesday despite better-than-expected fiscal fourth-quarter results, as investors weighed rising memory costs, AI growth prospects and the stock’s premium valuation.
The decline came as Nasdaq futures gained 0.42%, while S&P 500 futures slipped 0.03%.
Wall Street analysts offered mixed but largely positive views on Apple’s outlook. Bulls pointed to its strong hardware ecosystem, cash flow and AI opportunities. Others raised concerns about rising costs, slowing Services growth and valuation.
Apple Beats Q4 Expectations, Warns of Higher Costs
Apple reported fiscal fourth-quarter revenue of $114.48 billion and earnings of $2.10 per share, beating Wall Street estimates.
Product revenue rose to $82.90 billion from $73.72 billion a year earlier. Services revenue climbed to $31.57 billion from $28.75 billion, while iPhone revenue increased to $57.58 billion from $49.03 billion.
However, management warned that memory costs could rise beyond the December quarter.
CEO John Ternus said lower-cost inventory and savings on other components could help offset the pressure. COO Sabih Khan expects memory-related constraints to affect Mac and iPad into next year.
Ives Sees Major AI Revenue Opportunity
Ahead of earnings, Dan Ives of Yorkville Ives, told CNBC that Apple could benefit from a new hardware upgrade cycle.
Ives highlighted 325 million iPhones that have not been upgraded in more than four years. Apple’s installed base of 1.5 billion iPhones and 2.5 billion iOS devices also presents a major opportunity to generate AI revenue.
He expects AI offerings to account for 15% to 20% of Services revenue over the next 18 to 24 months.
His sum-of-the-parts valuation suggests Apple could be worth $400 to $450 per share, supported by AI and Services growth.
See More:
Top Value Stocks
Belski Highlights Apple’s Cash Flow Advantage
Brian Belski, founder, CEO and CIO of Humilis Investment Strategies, also defended Apple’s premium valuation ahead of the results.
He pointed to roughly $136 billion in free cash flow and the company’s consistent earnings performance.
Unlike other technology giants, Apple has avoided massive AI infrastructure spending.
Belski said Apple’s strategy of integrating AI into its existing hardware and Services ecosystem could support growth without significantly increasing capital spending.
Belski called Apple the “mack daddy of technology companies,” citing its strong cash flow, consistent earnings and vast ecosystem. He argued that these strengths justify the stock’s premium valuation and support his long-term bullish outlook.
Munster Sees Mac Growth but Warns of AI Risks
Following the results, Gene Munster of Deepwater Asset Management called Apple’s quarter solid, citing strong iPhone and Mac performance.
Munster told CNBC that Mac revenue grew 24%, beating Wall Street’s roughly 15% forecast.
He expects Mac revenue to rise 15% to 20% next year, well above the Street’s 6% estimate, as AI drives hardware upgrades.
However, Munster warned that Apple risks falling behind competitors developing personalized AI agents.
He questioned whether improvements to Siri would be enough as consumers increasingly turn to AI-powered assistants.
Flax Says Apple Can Weather Rising Memory Costs
Daniel Flax of Neuberger Berman remained bullish following the earnings report.
Flax told CNBC that strong demand for the iPhone 18 Pro and Pro Max, Mac growth and Services revenue support Apple’s outlook.
He expects memory costs to remain a challenge through 2027 and possibly beyond.
However, supplier negotiations, component savings and improved manufacturing yields could help offset the impact.
Flax expects Apple to continue growing earnings and free cash flow. He sees the stock as attractive over the next 12 months.
Wall Street Flags Apple’s Steep Valuation
Not all analysts were equally optimistic.
Ahead of earnings, Main Street Research CIO James Demmert told CNBC that he remained bullish but warned that Apple’s valuation of roughly 35 times earnings leaves little room for margin pressure.
Odyssey Capital Advisors Principal and CIO Jason Snipe also raised concerns about slowing Services growth, margins and holiday-quarter guidance.
Other analysts shared similar concerns before the results.
Needham’s Laura Martin highlighted risks tied to China, memory costs and Apple’s dependence on iPhone sales.
Bernstein’s Mark Newman viewed Apple as a defensive investment because of its limited AI spending. Meanwhile, MoffettNathanson’s Craig Moffett warned that a valuation of roughly 36 times forward earnings already reflects considerable investor confidence.
Technical Analysis
Apple is trading below its 20-day simple moving average (SMA) of $342.35 and its 50-day SMA of $333.62, signaling short-term weakness.
However, the stock remains above its 100-day SMA of $321.91 and 200-day SMA of $296.96. This suggests the longer-term uptrend remains intact, although the 100-day average faces a near-term test.
The relative strength index (RSI) stands at 48.31, indicating neutral momentum. The reading suggests the stock is neither overbought nor oversold.
Traders may watch $345 as a key resistance level, near the 20-day moving average. A sustained rebound could bring the 52-week high of $351.73 into focus.
On the downside, $310 is the next key support level if selling pressure continues.
Apple has gained 25.75% over the past 12 months, leaving room for profit-taking after its extended rally.
AAPL Price Action: Apple shares fell 4.65% to $322.60 in premarket trading Tuesday, according to Benzinga Pro data.
Image via Shutterstock
Recent Comments