Wall Street Models Lag Structural Reality, Prompting Me To Add an ‘Overvalued’ Apple Alex Sirois Thu, November 12, 2026 at 12:45 PM EST 4 min read AAPL +0.13% MSFT +0.95% GOOGN +1.85% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Apple trades at $356, above the $341 analyst target, while its 2.5 billion devices and 76% Services gross margin show Wall Street models lag.
Microsoft costs 58 times free cash flow versus Apple's 38, while Alphabet's cash flow turned negative, so Apple wins on cash reaching shareholders.
Apple's operating cash flow jumped 30% to $145 billion, funding a fresh $100 billion buyback that shrinks the share count.
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I keep buying Apple (NASDAQ:AAPL), and every earnings report hands me another reason to do it again. The stock trades at $355.63, up 31.17% year to date. The analyst target is $340.77, which is below the share price. To me, that gap says Wall Street's models still haven't caught up with what Apple has become.
Apple owns the customer relationship at a scale nobody else matches. It has over 2.5 billion active devices and over 1.5 billion paid subscriptions. Services revenue reached an all-time high of $31.573 billion in the September quarter, at a 76% gross margin. The new CEO, John Ternus, called the installed base "the foundation for future growth." I agree. Every device Apple sells gives that recurring revenue engine another customer to earn from for years.
The first is growth. Fiscal 2026 revenue rose 15.06% to $478.834 billion, and EPS came in at $8.98. September-quarter EPS of $2.10 topped the $1.9782 consensus, which makes it Apple's 10th consecutive earnings beat.
The second is cash. Operating cash flow rose 30.15% to $145.097 billion, while capital spending fell 28.9% to $9.041 billion.
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The third is capital return. The board authorized another $100 billion buyback and raised the dividend 4% to $0.27. The 0.30% yield is thin, so I count buybacks as my income engine. Apple bought back $24 billion of stock last quarter alone, and every share it retires gives me a bigger piece of the company.
The P/E for Microsoft (NASDAQ:MSFT) is lower at 29 against Apple's 39. On free cash flow, though, it costs 58 times versus Apple's 38, because capital spending rose 102.99% last quarter. Even though Alphabet (NASDAQ:GOOGL) looks cheap at a P/E of 13, its free cash flow came in at negative $9,065 million last quarter. It is also paying for its AI build-out partly by issuing new shares and taking on debt. I want the cash a company earns to reach shareholders, and Apple delivers that.
Management guided December-quarter gross margin to between 45% and 46%, down from 47.9%, and expects memory prices to keep rising beyond the December quarter. Tariff refunds also added $0.05 to September-quarter EPS, and that boost won't come back. Still, Apple raised iPhone prices in September, Services margins support the hardware side, and management expects the December quarter to be its best revenue quarter ever, with growth of between 7% and 10%.
Demand for the iPhone Duo is exceeding supply, Siri AI is rolling out across languages, and Greater China revenue rose 21%. Berkshire Hathaway (NYSE:BRK.B) held its 227,917,808 shares unchanged through June. Keep an eye on whether analyst models move closer to Apple's share price as these drivers play out.
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