QS Research · Michael Burry's Scion Capital analyst template · 2006
Apple Inc. (AAPL)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case +12% · downside -10% · upside +20%
The market is not missing the franchise: Apple earned $132.18B net income and $136.06B free cash flow in FY Sep 2026 on only $31.30B net debt, but the stock already trades at 37.6x those earnings and 29.2x EV/EBITDA, a premium to nearly every peer. I use FY Sep 2026 as the base: base case $132.18B x 1.117 = $147.65B net income (using the +11.7% next-year estimate, S65) x 37.6x P/E = $5,551.6B, +11.6% versus the $4,975.38B market cap. Downside $132.18B x 0.90 = $118.96B x 37.6x = $4,472.9B, -10.1%; upside $132.18B x 1.20 = $158.62B x 37.6x = $5,964.1B, +19.9%. The cases bracket today's price and the rule is not met for a long or short, so this is a watch; the premium multiple plus memory-cost and services-deceleration headwinds are why a short setup could form. The balance sheet and buyback are real supports, so I am not shorting a high-quality franchise without a catalyst that forces the multiple down.
Key numbers
- Share price: $342.37
- Market cap: $4,975.38B
- Latest financial period: FY Sep 2026 to Sep 26, 2026
- Revenue (FY Sep 2026): $478.83B
- EV / EBITDA (FY Sep 2026): 29.2x
- P/E (FY Sep 2026): 37.6x
- Price / book: 44.39x
The 15 boxes
- ✓ 1. Long-form business notes
Apple makes money by selling hardware (iPhone, Mac, iPad, wearables/home/accessories) and services (advertising, AppleCare, cloud, digital content, payments), managed through five geographic segments. FY2026 net sales were $478.83B versus $365.82B in FY2021, with operating income rising from $108.95B to $158.06B over the same fiscal years. The newest 10-K shows a broader product line and cloud-services language tied to Apple Intelligence and Siri AI, while distribution remains majority indirect at roughly 60% of FY2026 net sales.
- ✓ 2. Competitive advantage
The 10-K admits the markets are brutal — aggressive price competition, downward pressure on gross margins, and rivals built for very low cost — yet Apple's own numbers show the opposite of what that pressure should produce: gross margin 41.8% in FY2021 to 48.8% in FY2026 and operating margin 29.8% to 33.0%, with operating cash flow of $145.10B on capex of just $9.04B in FY2026. The advantage is not share (the 10-K states Apple has minority share in smartphones, PCs, tablets and wearables) but a self-designed full stack plus brand and ecosystem, which shows up in price/margin rather than volume. The two live threats to that margin: single/limited-source components (advanced semiconductors, memory, storage) with Apple saying cost trends will intensify, and the risk-factor diff's new app-distribution/commission language plus AI competition — all of which attack the services and pricing layer where the margin lives.
- ✓ 3. 10-Q takeaways
Q3 2026 (quarter ended 2026-06-27) net sales were $109,417M, up 16% year over year, with total gross margin of 50.1% versus 46.5% and diluted EPS of $2.02 versus $1.57; both margin and EPS carry a disclosed one-off benefit from tariff refunds (about 2 points of gross margin, $0.11 of EPS), so underlying operating growth is strong but smaller than reported. iPhone (+22%), Mac (+29%) and Services (+12%) led, iPad fell 6%, and every reported geographic segment grew double digits, with Greater China +22%. Nine-month operating cash flow was $117.0B versus $81.8B, funding $62.1B of buybacks and $11.8B of dividends, while inventories jumped to $11,092M from $5,718M at 2025 year-end. Neither the 10-Q nor the Q3 2026 earnings release gives numeric forward guidance.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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