Apple's stock price has risen by 25% since the low point at the end of June, with its market value increasing by about $1 trillion. As the valuation reaches its highest level since 2008, the market has high expectations for its upcoming financial reports, and any performance that falls short of expectations could trigger fluctuations in the stock price.

Apple's stock price has soared in recent months, leaving little room for disappointment when this iPhone manufacturer released its financial report after the close of U.S. stocks on Monday.

Since hitting a low at the end of June, Apple's stock price has risen by 25%, with its market value increasing by about $1 trillion. At the same time, Apple's stable revenue growth and continuously increasing free cash flow have provided a safe haven for investors concerned about large tech companies such as Alphabet and Amazon's massive investments in artificial intelligence infrastructure.

This round of gains has pushed Apple's stock valuation to its highest level since 2008. If the company's performance falls short of market expectations, the stock price is particularly vulnerable to shocks.

Compiled data shows that, based on the expected earnings for the next 12 months, Apple's current price-earnings ratio has reached 36 times, which is nearly twice the overall valuation of the S&P 500 index.

Ben Carrou, Co-Chief Investment Officer of Tandem Investment Advisors who holds Apple stocks, stated: "Apple's current valuation is at the 99th percentile of its historical valuation distribution. When an asset is priced so fully, any unexpected situation could pose a risk."

He added, "Currently, Apple is regarded as a safe-haven investment, but if its growth falls short of market expectations, investors will realize that it is not as secure as they thought. We might see its valuation multiples reassessed."

For investors who have been following Apple for a long time, this kind of risk is not unfamiliar to them.

Three months ago, due to a shortage of components that dragged down the company's quarterly revenue forecast, Apple's stock price experienced its largest one-day decline in 16 months.

Wall Street expects Apple's revenue in the fourth fiscal quarter to increase by 11% year-on-year to $113.5 billion, and net profit to grow by 6% to $29.2 billion.

Compiled analyst forecasts average that this will drive Apple's annual revenue growth to 15% for the fiscal year 2026, the highest level since 2021. However, it is expected that the company's revenue growth rate will slow down over the next two years.

Apple's financial report this time will provide the market with substantial evidence for the first time to assess the popularity of its new foldable screen iPhone.

This device went on sale last month, and Apple stated that market demand was "exceptionally strong," resulting in the delivery date being postponed until next year.

However, analysts believe that the extended delivery cycle may also reflect limited product supply. In addition, there are reports that the screens of iPhone and Duo develop cracking issues after short periods of use, which could diminish the product's appeal to users who are not among the early adopters.

Duo is of crucial importance to Apple.

It not only represents the largest design change for Apple's flagship products in many years, but also has a starting price of $1999. Investors hope that this high-end pricing will drive the company's revenue growth.

Industry research ( Bloomberg Intelligence ) estimates that as consumers shift from the relatively cheaper Pro and Pro Max models to the Duo model, this smartphone is expected to generate sales revenue of $28 billion to $32 billion in fiscal year 2027, and it will also drive up the average selling price of iPhone.

Last week, Apple's attractiveness as a safe haven for tech stocks was particularly evident.

After Alphabet and Amazon announced disappointing financial reports, investors flocked to sell stocks related to artificial intelligence.

Last Friday, the Philadelphia Semiconductor Index tumbled 7.2%, recording its worst single-day performance since June. In contrast, Apple's stock price only fell by 1.2%, performing better than the S&P 500 Index.

As NVIDIA's stock price was involved in this round of selling off, Apple surpassed the chip manufacturer last Friday and once again became the world's most valuable company for the first time since July, with a market value of $5.03 trillion.

Although Apple's revenue growth rate lags behind that of most large tech peers, its free cash flow performance stands out notably.

As investors become increasingly skeptical about the spending of tech giants on artificial intelligence, free cash flow has become a key indicator for measuring corporate performance.

Apple's free cash flow is expected to grow by more than 40% in fiscal year 2026, reaching $141.5 billion, and to continue to grow over the next three fiscal years.

In contrast, Alphabet, Meta and Amazon are expected to continue to face a free cash flow gap.

Daniel Frax, a Senior Research Analyst at Neuberger Berman ( Neuberger Berman ), stated: "The market recognizes Apple's strong ability to generate free cash flow. If this performance continues, I believe there is still room for Apple's stock price to rise further."

He added, "For Apple's stock price, the most important thing is whether the company can successfully advance its product update cycle and convert it into strong free cash flow growth. At least from the initial signs, the market's interest in Duo is quite strong."

However, the coexistence of high valuations and low growth has dampened Wall Street's enthusiasm for Apple's stock.

Since Apple announced its last financial report at the end of July, at least six analysts have downgraded their ratings for the stock.

In October, Loop Capital downgraded Apple's rating from "Buy" to "Hold" on the grounds of the iPhone shipment trend.

Last Friday, Bank of America also removed Apple from its list of best investment recommendations for U.S. stocks ( US 1 List ), stating: "Considering the potential unfavorable factors the company may face relative to market consensus expectations, we are cautious about its short-term prospects."

Among the analysts being tracked, less than 60% recommend buying Apple stock, while for Microsoft, Amazon, and Meta, this proportion exceeds 90%.

In addition, Apple's current stock price is higher than the average target price of analysts, making it the only stock among the "Big Seven" with a implied negative return rate over the next 12 months.

Tandem Investment Advisors's Karu stated: 'Valuation is the main risk Apple faces, but considering the higher certainty of its business model, Apple indeed deserves a certain degree of valuation premium.'

He added, "The fluctuations we see in other tech stocks reflect the degree of uncertainty in the market regarding the prospects of these companies. Unless Apple's financial reports truly shake investors' assessments of its fundamentals—which I don't think is likely to happen—Apple should at least be able to continue to remain unaffected by some of these market fluctuations."