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QS Research · Michael Burry's Scion Capital analyst template · 2006

Apple Inc. (AAPL)

As of 2026-11-02 · 12/15 boxes filled from SEC filings and market data

Conclusion: WATCH

Conviction low · base case -16% · downside -35% · upside +3%

On TTM to Jun 27, 2026, Apple earned $128.93B net income and $136.68B free cash flow; at $339.44 it trades at 38.4x P/E and 10.68x EV/Sales, above every peer. Using the midpoint 9x EV/Sales on TTM revenue $466.82B gives EV $4,201.4B; less net debt $30.9B and /14,594.18M shares = $285.8, -15.8% vs today. Downside 7x EV/Sales = $221.8 (-34.7%) and upside 11x = $349.7 (+3.0%), so risk/reward is poor and the cheap-price condition is absent. The market is pricing in years of double-digit growth and flawless new-product execution, while deep value sees a quality franchise priced beyond peer multiples with little margin for error. I would wait for a de-rating toward peer-implied values before acting.

Key numbers

The 15 boxes

  1. ✓ 1. Long-form business notes

    Apple makes money from hardware—iPhone, Mac, iPad, and Wearables/Home/Accessories—and Services, managed through five geographic segments. FY2025 revenue was $416.16B with operating income of $133.05B, up from $274.51B and $66.29B in FY2020. Direct distribution increased from 34% to 40% of net sales, and the product/services mix shifted (e.g., Apple Vision Pro added, iPod touch dropped; more subscription services). The latest filing emphasizes minority share and intense competition in core hardware markets.

  2. ✓ 2. Competitive advantage

    Apple's 10-K describes highly competitive hardware markets where it holds only a minority share and faces aggressive price competition and imitation. The company's stated differentiation is vertical integration of hardware, operating system and software, plus broad IP and corporate reputation. FY2020-FY2025 results show large and generally rising absolute profitability (FY2025 operating income $133.05B on revenue $416.16B), with a modest FY2023 dip. The durable advantage therefore appears to rest on integration, IP and ecosystem/reputation, not market-share dominance.

  3. ✓ 3. 10-Q takeaways

    In Q3 FY2026 (ended June 27, 2026), Apple's total net sales rose 16% YoY to $109.4B, with strong iPhone, Mac and Services growth, while iPad declined 6%. Gross margin expanded to 50.1%, and the company returned $25.8B via buybacks plus $4.0B in dividends. MD&A flags supply constraints and tariffs as material risks, but gives no specific quantitative outlook.

  4. ✓ 4. Corporate governance
  5. ✓ 5. Overview of the prior 3 years of 8-K filings
  6. ✓ 6. Other significant filings
  7. ✓ 7. Chronology of significant news and events
  8. ✓ 8. Comparables valuation interpretation
  9. ✓ 9. Insider trading interpretation
  10. ○ 10. Earnings-call notes
  11. ○ 11. Impression of the shareholder letter
  12. ○ 12. Scuttlebutt overview
  13. ✓ 13. Valuation and risk/reward summary
  14. ✓ 14. Current price suppression and potential catalysts

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