Apple heads into earnings with optimism and lofty valuation

Apple reports earnings on Thursday, and expectations are high.

Once a laggard among US tech giants, shares have surged more than 50 per cent since April, edging Apple back toward a $4 trillion (€3.4 trillion) valuation – second only to Nvidia.

The catalyst is the iPhone 17, whose redesign has stirred a strong upgrade cycle that has taken investors by surprise. Early US and China sales are running 14 per cent ahead of last year’s model. Analysts forecast iPhone revenue growth of 4 per cent this year and 5 per cent next, reversing two years of mild decline.

Still, Apple’s rebound has its vulnerabilities. Tariffs continue to warrant scrutiny, with Jefferies analyst Edison Lee warning they may “come back to haunt” Apple. While signs of improved Chinese demand are welcome, uncertainties regarding US-China tariffs are “underestimated risks”. Jefferies sees “more downside than upside” for Apple, warning shares could fall 20 per cent from current levels.

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Bearish arguments have fallen on deaf ears lately. Still, compared with most of its magnificent seven counterparts, Apple’s contribution to S&P 500 earnings growth is modest this quarter. Nevertheless, its valuation – Apple trades on 32 times estimated earnings – remains firmly in growth stock territory.

In short, while expectations are high, so is the valuation. Thursday’s report will test whether recent optimism can be sustained.