Marriott president & CEO Anthony Capuano sells $26.6m in company stock

Apple CEO John Ternus has dubbed the company the "best on earth," but whether its stock can claim that lofty title depends heavily on investors' appetite for artificial intelligence exposure, according to Bernstein analyst Mark Newman. The investment firm kept its Outperform rating and boosted Apple's price target to $380 from $370, suggesting roughly 12% upside from its November 2 closing price of $338.32.

Bernstein sees Apple as an appealing tech play for those seeking a less direct stake in the AI infrastructure trend. This view hinges on Apple's extensive consumer footprint, robust hardware demand, and potential to bring AI services to its vast user base of over 2.5 billion active devices. However, the upside may take longer to materialize in earnings compared to companies that can directly capitalize on rising AI spending.

Despite a strong fiscal fourth quarter, where revenue surged 12% to $114.5 billion, beating analyst estimates, and diluted earnings per share climbed 14% to $2.10, Apple's hardware segment faces challenges. iPhone sales jumped 17% to $57.6 billion, driven by demand for the iPhone 18 series, while Mac sales grew 24%. For the upcoming December quarter, analysts expect revenue growth between 7% and 10%, surpassing market projections.

In terms of premium offerings, revenue growth could range from 30% to 35%, thanks to higher prices and a more lucrative product mix.

However, Apple's profitability is not as rosy. Gross margin guidance for the December quarter, set at 45% to 46%, falls short of expectations. Rising memory costs threaten to erode the gains from selling premium devices, and a slower-than-expected growth in App Store and licensing revenue further dampens the services outlook. Bernstein has reduced its earnings estimates for fiscal years 2027 and 2028, projecting $9.78 and $11.13 per share, respectively, down from $9.90 and $11.26 previously. These lowered estimates stem from concerns over margins and research expenditures.

Valuation also poses a hurdle. Apple's stock trades at 35.1 times forward earnings, a stark contrast to its average forward multiple of 22.7 times since 2016. This elevated valuation leaves less room for error if hardware costs climb or if the monetization of AI technology unfolds more slowly than expected.