Business Understanding:

Gemini is a centralized crypto exchange (CEX) founded by the Winklevoss twins in 2015. It was founded by the twins to fix the infrastructure and trust problems found in the Bitcoin industry, displayed by the Mt. Gox collapse in 2014. Gemini was built with four pillars in mind:

• Product

• Security

• Licensing

• Compliance

Gemini was “built by elite engineers and technologists with a security-first mindset.” While starting out as a Bitcoin exchange, Gemini later turned into a crypto exchange facilitating over 90 cryptos.

Everything above was Gemini 1.0, a crypto exchange platform built on trust and regulation. The Winklevoss twins are now transforming Gemini into “Gemini 2.0,” a “…super app for the markets economy…” where users will be able to fulfill all their financial needs. The path towards becoming a super app started with the introduction of the Gemini credit card, which gives crypto cash back, and now stocks, which allow the trading of thousands of stocks on the Gemini platform. Their next big bet is prediction markets, which were released in 2025 and are expected by management to become a big part of the business model. Gemini’s primary revenue drivers are exchange fees and credit card revenue, which combine for 63% of total revenue. Below are all of Gemini’s offerings in detail.

Offerings:

• Gemini Exchange—Gemini’s main offering for Gemini 1.0, allowing the purchase of over 90 assets, charging various fees to generate income.

• The Gemini Credit Card - A credit card that gives crypto back instead of cash back, allowing users to earn crypto with every swipe.

• Gemini Predictions—One of the newer additions to Gemini’s offerings, allowing users to bet on almost anything, marking a shift from 1.0 to 2.0 and Gemini’s bet that markets are the future.

• Staking—Allows users to stake certain cryptos for rewards whilst holding.

• Stocks—The most recent feature offered by Gemini is the ability for users to trade hundreds of stocks. In the EU this includes tokenized stocks (on-chain stocks allowing for stock ownership in the crypto ecosystem), a feature that will hopefully come to the U.S. soon as well.

Competitive Advantages:

A durable competitive advantage is the most important thing a business needs to sustain long-term growth and profitability; unfortunately, it seems that Gemini is very lacking in this department. Gemini has no technological abilities that put them significantly ahead of competitors, nor do they have any sufficiently different features making them much more attractive to potential customers. Gemini’s goal of becoming a financial “super app” combining prediction markets, stocks, crypto, and crypto credit cards does not seem to be a very unique one, or at the very least, multiple companies are doing the same thing, a fact I will expand on later. Gemini’s only possible advantages include the following:

1. Their persistent focus on security and regulatory compliance, something that should not only protect them from an FTX-style collapse but also attract users, both retail and institutional, who are cautious about crypto and/or highly value security.

2. The Gemini Credit Card: The Gemini credit card, unlike some competitors, is truly free to use with no annual fee and no higher tiers, meaning every user gets the same experience for free.

3. Their size, Gemini’s smaller size in both headcount and market cap relative to competitors, allows them to move swifter than others.

4. Their founders, the Winklevoss twins, provide an advantage to Gemini that not many public companies have: outside funds that dwarf Gemini itself and a complete dictatorship of the company due to their voting shares that give them ~95% voting interest. While this can be an advantage, it also makes Gemini uninvestable if you don’t believe in the twins.

RISKS:

Gemini has what I believe to be two major risks:

1. Crypto market over-reliance: Gemini, despite furthering its diversification of revenues, still receives ~34% of its revenue from crypto transactions. A decline in overall interest in the crypto markets and thus a decline in transactions will lower this revenue stream proportionally. Along with crypto’s cyclicality being a danger for revenue, it is also a danger for the balance sheet, as Gemini holds hundreds of millions of dollars in crypto assets on the balance sheet.

2. Competition: Gemini is at risk of loss of both users and revenues due to competition such as Coinbase, who all offer the same suite of flagship offerings, including crypto, stocks, predictions, and credit cards. Competition will be expanded on later on.

Customer Acquisition:

Gemini’s customer acquisition is based on marketing through advertising and referrals. They spend on both broad awareness marketing and performance marketing, with elevated spending in Q3-Q4 2025 compared to Q1 2026. Marketing is expected to cost around 15% of revenue for the near future, per the Q1 2026 earnings call. Marketing spend is spent opportunistically, and the majority of said spend in Q1 was credit card rewards along with promotional and referral incentives. I think Gemini’s strongest marketing opportunity is still in referrals, particularly their credit card referral program.

Financial Picture:

Revenue By Type:

• Services Revenue ~ 43%

  • Credit Card Revenue ~ 29%; Credit card revenue is up 300% YoY, making it the most important growth avenue for Gemini at the moment.

• Transaction Revenue ~ 48%

  • Exchange Revenue ~ 34%; Exchange Revenue has historically been the largest revenue source for Gemini, though it will most likely be overtaken by credit cards soon with exchange revenue being down (27%) YoY.

• Non-Customer Revenue ~ 8.5%

Analysis:

Credit card revenue has shown itself as one of the important facets of the business, with it making ~30% of revenue, and with it growing +300% YoY, it will soon become the largest and potentially the majority of the business. Credit cards are the most promising endeavor that Gemini is engaged in. Below I expand more on the financial statements.

Income Statement:

While revenues have grown consistently over the last couple years, the same cannot be said for net income, which has actually declined since 2023, though it is up over the last twelve months relative to full year 2025, but Gemini is still yet to be profitable. Operating expenses continue to rise, particularly because of stock compensation pushing operating margins further into the gutter.

Balance Sheet:

The biggest risk on the balance sheet isn’t liabilities but rather the crypto assets, as they further heighten crypto exposure. This heightened crypto exposure could very much be seen as a positive depending on crypto’s returns in the future. Positive net assets mean the company isn’t overleveraged, leaving a margin of safety in operating mistakes.

Cash Flow Statement:

Free cash flow has been consistently negative over the last couple years and can be expected to remain negative for the foreseeable future. There are no red flags seen on the cash flow statement, though cash won’t be flowing into the business anytime soon as it is still in its growth stage.

Management:

As previously spoken about, the Winklevoss twins have a dictatorship when it comes to decision-making at Gemini; with Tyler being CEO and Cameron being president and their ~95% voting interest, they are able to steer Gemini wherever they choose. This can be great if you believe in the founders or horrible if you don’t, but listening to the earnings calls, I have uncovered that despite their economic interest in the company and their mission to make it a “super app,” their communicativeness isn’t elite in the sense that they don’t always answer straight. Now many management teams aren’t 100% perfect when answering analysts’ questions. But the most pertinent thing when it comes to Gemini is their unprofitability and when they can expect to become profitable, and management has stated that they won’t give guidance on revenues or profitability and has proven so by side-stepping questions about it. Management refuses to guide on revenues and earnings due to “macro conditions,” but frankly, it’s simply because they do not know, which is understandable but also begs the question of whether you’re comfortable investing in a company uncertain about its own profitability.

Competition:

Gemini’s single biggest risk is outside competition, including, but not limited to:

• Robinhood

• Coinbase

• and Crypto.com

As I’ve stated multiple times now, Gemini 2.0 has the goal of being a market super app, which means being a one-stop shop for a multitude of offerings such as stocks, crypto, credit cards, prediction markets, and presumably more to come. The problem with this goal is not its viability but rather its saturation, as each company above offers all the same features, if not more. Gemini has no significant advantage over these companies, which means as a long-term investment it doesn’t hold tremendous value, but this is not to say Gemini can’t carve out their own market, especially with their most intriguing offering in the Gemini Credit Card. The Gemini credit card offers a unique value proposition in the crypto-back credit card market, while competitors who offer a crypto-back credit card only do so with limits or an annual fee (whether directly or through a subscription to their app, like Coinbase). Gemini offers a free crypto-back credit card with a base 1% back on everything and up to 4% in certain categories. This free card not only provides direct value for both Gemini and the consumer, but it also acts as a Trojan horse for the rest of Gemini’s offerings, such as the ability to set up auto staking of your crypto back rewards.

Valuation:

To build Gemini’s valuation, I had to use different methods from my usual DCF model due to two things:

1. The fact that Gemini is unprofitable and will be for the foreseeable future, thus having negative FCF.

2. The fact that management has offered zero revenue or profitability guidance.

With a normal DCF out of the window, I used Coinbase and their Price/Sales and Price/Book Value ratios along with Gemini’s mean Price/Sales and Price/Book Value ratios and valued Gemini’s current revenue and book value at those ratios.

Originally I found both historical ratios for Coinbase and Robinhood but removed Robinhood from the comparison because, although it would make it less comprehensive due to having only one comparison with Gemini, it would also make it more accurate because Gemini and Coinbase are each other’s closest competitors in terms of similarity, and Robinhood is sufficiently different enough from Gemini that it makes a misleading comp.

Below is the data for Gemini’s valuation at Coinbase’s ratios:

To further explain the chart above, I used Coinbase’s current price/sales ratio and their price/book value ratio and applied them to Gemini. The reason I used these ratios specifically is because Gemini, as an unprofitable company, still has usable P/S and P/BV ratios, unlike a P/E ratio, for example. Coinbase is the perfect company to compare Gemini to because of the similarities expressed earlier in the competitors section.

The second valuation method I used was the comparison of Gemini’s current P/S and P/BV to their historical mean. Below I show the data used to find what Gemini’s price would be if it were valued at its historical mean:

*Note that Datawrapper rounded down the numbers.

Similar to the Coinbase comparison, I simply revalued Gemini, but this time based on its own historical mean P/S and P/BV.

Averaging out all these prices gets us an intrinsic value of ~$9.33. Even though after extensive research and calculations I eventually came up with this valuation, I would still take it with a huge pile of salt due to the business risks I explained earlier. While I think Gemini will continue to grow revenue and I think it’s likely they will become profitable due to the potential of the credit card business, I don’t think there’s a sufficiently strong enough moat to validate an investment in Gemini Space Station, Inc.

Final Story:

Chapter 1, The Start:

Gemini Space Station, Inc. is a capital markets company that originated after the Winklevoss twins were introduced to Bitcoin and believed it was the future of money. Gemini originally started as a Bitcoin exchange but later grew to support dozens of cryptos, but with every new asset, their founding principles of trust, security, and compliance were not lost.

Chapter 2, A Super App:

Now the Winklevoss twins are moving from Gemini 1.0, that being a crypto company, to Gemini 2.0, a super app for the markets era. Gemini started moving beyond a simple crypto exchange with the launch of the Gemini Credit Card in 2021, one of the first credit cards that offered direct crypto back. The Gemini Credit Card directly opened up a brand-new avenue of revenue generation, but it also bolstered all of Gemini’s other revenue streams as their credit card brought users to their other offerings, such as crypto staking. Now Gemini 2.0 offers crypto, stocks, prediction markets, the Gemini credit card, staking, and the Gemini wallet. All these offerings create an ecosystem where the consumer doesn’t have to leave, as they can get all their markets in one place. Gemini’s goal of creating a financial super app could put them in a position to be a big player in the future financial ecosystem of crypto and web3.

Chapter 3, Competition:

The most important part of any potential investment outside of valuation is whether or not the business has a durable competitive advantage against its competition. Gemini’s idea of a super app that combines stocks, crypto, predictions, and more into one app and one ecosystem may be a great idea; the problem lies in the fact that Gemini is not the only app with all these offerings. Now, that wouldn’t be a problem if Gemini were by far the best or had a clear path towards being the best, but they don’t. Companies like Robinhood and Coinbase provide many of the same features as Gemini and sometimes even more and/or more capable features. Gemini’s principals of security and compliance may not alone allow Gemini to overcome its competitors and grow disproportionately to the market as a whole, especially because its competitors are more resourced and more entrenched in capital markets.

Chapter 4, Valuation:

Being down over 90% since its initial IPO in September of 2025, it would seem the markets came to a bunch of the same conclusions I listed above, but that does not mean that Gemini has reached fair value; in fact, it may have been oversold, as my intrinsic value of ~$9.33 suggests an +117% upside from current prices at the time of writing, but the confidence or lack thereof that can be had in this valuation is expressed in the valuation section.

Chapter 5, Gemini’s Future:

Gemini has the founders and vision to become a significant player in the Web3 financial future, but I don’t believe they have a competitive advantage over their competitors that is significant enough to deem them an excellent company. Their idea of a markets super app, while in a vacuum, is exciting; in reality, it is an idea held by multiple companies, most of whom have the scale and balance sheets to execute far better than Gemini can. But even with all that being said, it is very much possible that with the leadership and financial backing of the Winklevoss twins and the truly unique value proposition and revenue generation of the Gemini Credit Card, Gemini could see itself become as successful as any of the other super apps out there. Maybe all Gemini needs is the tailwind of a crypto summer to make it a permanent and profitable mainstay of the financial future. The question is, is there a big enough margin of safety? And to that I would say no.

Rating: AVOID

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DISCLAIMER: Nothing I say constitutes financial advice. I am not a financial advisor. All investments carry risk, including the complete and permanent loss of principal.

Business Understanding:

Duolingo is a technology and education company whose stated goal is “to develop the best education in the world and make it universally available.” Duolingo’s primary business is that of teaching people languages and other subjects in a gamified and engaging way. The previously stated goal is in line with their freemium business model that allows users to access all content for free, and if they choose, they can pay for an ad-free experience and additional features. This freemium model maximizes scaling without sacrificing monetization.

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Offerings:

• The Duolingo App - Flagship offering, growth engine, top of funnel, monetized directly with ads.

• Super Duolingo - The most important offering, making up the vast majority of bookings as well as being available for all languages, it is the primary revenue driver.

• Duolingo Max—a premium subscription not currently being shown to all users—provides the newest and most expensive features.

• Duolingo English Test—An English test that proves one’s proficiency in the language.

• Duolingo for Schools - Early exposure to Duolingo for students further maximizes scale.

Key Performance Indicators:

• Monthly Active Users (MAU) ~ 137.8M

• Bookings (Subscription Revenue): ~ $1.195B

• Daily Active Users (DAU) (Currently the most prioritized KPI) ~ 56.5M

• Paid Users (PU) (Any user paying for a subscription) ~ 12.5M

• Paid Users as a Percentage of Monthly Active Users ~ 9.2%

Competitive Advantages:

Duolingo’s competitive advantages largely center around their huge user base (controlling ~90% of the language learning app market). This user base allows them to do two extremely important things: One—collect data. Duolingo collects data on how users interact with their app; with nearly two billion training exercises performed daily, they have quite possibly the largest dataset of language learning data. This data allows them to do the second important thing, A/B testing. Duolingo performs thousands of A/B tests from different colored buttons to different lesson constructions. These tests are done across all 140M MAU to create the most effective and engaging learning experience for their users. There is one more thing that this data is used for, and that is the training of novel AI models to further enhance the user experience.

RISKS:

• Comp provides/develops better features and services, particularly with the help of AI.

  • Duolingo’s current user base is vast, and whether it be with AI or not, many competitors have tried and failed to compete with Duolingo.

• Duolingo gets outmatched by AI instead of becoming a winner with it.

  • As far as translating goes, Google Translate, including live translate, has been nye perfect for many years, and evidently that did not impair Duolingo’s growth. And when it comes to learning, Duolingo’s gamification and effectiveness are what have allowed for it to become the main player in the language learning app market in the first place.

• The MAU slowdown and the lower YoY growth of DAU are structural rather than one-off events.

  • Duolingo has shown cyclical changes of priority from user growth to monetization; the recent slowdown was due to monetization optimization.

• Duolingo strays from its mission and/or betrays trust in users, causing a mass exodus of users.

  • The company is run by the people who created the mission. I find deviation from it unlikely, along with the fact that many users, particularly those learning English for work, wouldn’t care as they still need the product.

Customer Acquisition:

Duolingo’s customer acquisition strategy revolves around organic content and maximum brand recognition with their mascot Duo. This strategy has been successful thus far, propelling Duolingo to the top of the education category on both the Apple App Store and the Google Play Store. Duolingo has become one of the most recognizable brands of any app. On the Q4 2025 earnings call, management acknowledged that there has been a decline in views on TikTok, blaming in part an algorithm change but emphasizing that despite a decline from the times when they consistently had months with the most viewed video, they still have lots of views and engagement on social media. Duolingo’s near-zero customer acquisition cost, which is a big part of their growth, shows no sign of stopping.

Financial Picture:

Duolingo has no accounting red flags with a good auditor and non-manipulative normalized earnings.

Income Statement:

Earnings have grown consistently over the last 5 years, going from unprofitable to profitable in Q2 2023. They have grown net income since, with net income being up +23.7% YoY in Q1 2026. This earnings growth can be expected to decline in Q3 and stabilize in Q4 per management’s guidance. Gross margins have been around ~73%, but management has guided ~69% gross margins looking forward. Operating margins have stayed around ~15%, which means a Degree of Operating Leverage (DOL) of 5.3x, showing a heightened risk if revenue declines. This is largely driven by high R&D, which for now and the foreseeable future is structural to scale appropriately.

Balance Sheet:

Duolingo has a healthy balance sheet with no debt and over a billion in cash and equivalents; this adds to the over two billion in assets. Duolingo also has a current ratio of 2.62, all this meaning they have more than enough cushion from negative events that may occur from any stall in growth.

Cash Flow Statement:

FCF has a +130% CAGR over the last 6 years, being up +43% YoY per year over the last 2 years; this extraordinary growth can be expected to slow down in the upcoming years. Operating cash flow and free cash flow are very similar due to negligible capital expenditures that can be expected from their business. Future cashflows will be spoken about in the valuation section.

Management:

Management has been both honest and communicative, and possibly most importantly, the company is run by a founder/CEO who owns a significant stake in the company, meaning he has skin in the game and it’s in his best interest for the company to monetize and grow long-term and focus on the big apples like 100M DAU rather than maximum monetization right now. The new CFO, Gillian Munson, has shown deep knowledge about both company financials and the future priorities for the company to maximize long-term scale and monetization. Capital has been consistently allocated towards R&D, though recently management has bought back shares, a practice I believe they should continue because, despite the fact that Duolingo is still in their growth stage, the stock is so undervalued right now they would enrich both shareholders and the company by buying back stock at these depressed prices.

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Valuation:

To come up with an intrinsic value per share for Duolingo, I used two methods to come up with a consensus FCF growth rate, and I used the same discount rate for both. The first method involved using KPI data to find the ratio between bookings and free cash flow. Once this ratio was found—bookings being around 3.11x more than FCF—I used KPI data to estimate MAU growth and PU as a percentage of MAU growth to estimate how much bookings would grow.

This chart shows the growth of bookings and thus FCF that I developed using historical KPI data to extrapolate monthly active users growth and paid users as a percentage of monthly active users growth into the future. Using this method, I found a future FCF growth rate of +10.24% YoY. The table below shows how I extrapolated MAU and PU as a percentage of MAU to find estimated PU over the next four years and then multiplied PU by the average value per paid user to find bookings and then FCF. (FYI, this all could have been done by simply extrapolating paid users, something I realized after doing all this 😅, but hey, at least the data is more granulated this way. 🤷🏼‍♀️)

On to the second method I used to calculate an FCF growth rate, management guidance. In the Q4 2025 earnings call, management guided bookings growth of 10-12%, and in the Q1 2026 earnings call, management reported a bookings growth of ~10.5%. Extrapolating 10.5% forward and using our previously established ratio of bookings being 3.11x FCF, I found almost the same nominal growth as the first method, which was unsurprising as they had almost the same growth rates (10.24% vs. 10.5%); one just had to be reverse engineered vs. being given by management. Using both guidance from the last two earnings calls and my own method of finding future FCF using KPIs, I decided upon a 10.5% growth rate for my DCF.

Now before I go further, I would like to address the elephant in the room, that being that FCF has a 139% CAGR over the last 5 years, an order of magnitude more than my suggested growth rate for the future. Whilst I would love to extrapolate previous years’ growth rates to the future, I can’t do that in good conscience, as not only has management explicitly said that monetary growth would slow this year, I’m also only capable of working with the most current growth numbers, numbers that are underwhelming compared to previous years. This is not to say that I’m pessimistic; quite the contrary, in fact. It’s simply that I would rather project numbers that are a “sure thing” rather than pure speculation (not that a projection into the future is close to a sure thing). If you were to ask my personal opinion about the future growth potential of Duolingo, I would say that I am extremely confident that they will hit their midterm goal of 100M DAU by 2028 and that this expanded engaged user base will expand bookings and thus FCF greatly, but that’s neither here nor there.

After that acknowledgement, let’s quickly get into discount rate and what you’re all here for: the valuation. I calculated the discount rate using a combination of current 10-year Treasury yields of 4.38% + an equity risk premium of 4% + a relatively low company-specific risk of around ~1% to come up with a discount rate of 9.5%. Using a growth rate of 10.5%, here are the next 10 years of FCF in a chart:

Discounting these future cashflows along with the terminal value to present value gets us this sensitivity table with the intrinsic value per share at different discount rates.

As can be seen at all sensitivity levels and with a 30% margin of safety, is still a buy, and this is using a conservative and “realistic” growth rate of 10.5%.

Final Overview:

Duolingo, Inc. is a technology and education company with a mission to bring high-quality education to the world. They utilize a freemium business model to maximize scale and accessibility. The primary revenue generator is bookings, more specifically “Super Duolingo.” Financially there are zero red flags with over a billion in cash and equivalents and no debt. Earnings, both revenue and net income, have grown spectacularly. Management has continuously guided a slow of that growth in 2026, prioritizing DAU growth over monetization for now. FCF is high relative to revenue with negligible CapEx; FCF has a +130% CAGR over the last 6 years, a percentage that can be expected to decline looking forward. The degree of operating leverage of 5.3X shows heightened risk if revenue declines; the reason for these high fixed costs is largely due to R&D, which has been and will continue to be high, particularly due to the active focus on increasing DAU. Duolingo’s moat exists because of data, iteration, size, and arguably the most important brand. Duolingo uses its size to collect data using hundreds to thousands of A/B tests to develop the most effective and engaging user experience, keeping DAU high and growing, creating an ever-increasing moat where more users lead to more data, which leads to more tests, which leads to more improvements, which leads to more users. On to brand, Duolingo has one of the most recognizable brands of any app, with their infamous mascot Duo. This brand, has allowed Duolingo to be the most downloaded education app on both the Apple App Store and the Google Play Store, acquiring 90% of the language learning application market. Management has allocated capital towards R&D and has retained all earnings excluding recent share buybacks, as it’s much more profitable to fund growth than to pay out earnings directly to shareholders. Management has shown a focus on long-term growth and success over short-term monetization, a prioritization that Wall Street seems to have punished. Not only is the business doing well, but the stock is also undervalued. Combining both current KPIs as well as management’s guidance, I calculated a 10.5% growth rate for my DCF. I also calculated a discount rate of 9.5%, calculating an intrinsic value per share (IVPS) of ~$204 with the IVPS at different discount rates being shown previously on the sensitivity table. was a buy at all discount rates and with a 30% margin of safety. Duolingo is down over 70% in the last year due to a combination of factors, the most pressing being Wall Street’s extremely rich valuation in 2025 that led to be pushed past $500 and a P/E of well over 100 in the same time. When management expressed a prioritization of user growth over short-term monetization, this valuation was greatly compressed, taking an arguably overvalued company to an undervalued company. Management’s priorities weren’t the sole reason for this revaluation; it was also due to fears about AI making Duolingo less competitive and that the slow DAU growth—despite still being over 20% YoY—may be structural rather than a one-off event. But the only reason any of these concerns were “problems” was because Wall Street’s rich and unsubstantiated valuation left no room for any error on management’s part nor a perceived stall in growth. Duolingo currently provides the opportunity to purchase a great company (due to its earlier explained moat) at an exceptional discount, ~$120 < $204.

Rating: BUY

DISCLAIMER: Nothing I say constitutes financial advice. I am not a financial advisor. All investments carry risk, including the complete and permanent loss of principal.

Business Overview:

Apple’s business is divided into two divisions, and those divisions are divided up into further sections:

• Products

  • Hardware (iPhone, iPad, MacBook, AirPods, etc.)

• Services

  • Advertising

  • Apple Care

  • Cloud Services

  • Digital Content (Apple TV+, Apple Arcade, etc.)

  • Payment Services (Apple Card and Apple Pay)

While Apple’s hardware may be front of mind when you think of the company, its services division is just as important for Apple’s profitability.

Revenue By Type:

(All numbers are 2025 full-year numbers and don’t include miscellaneous.)

Services ~ $105.38B - 26%

Products ~ $303.245B - 74%

Combined Revenue ~ $408.625B

Gross Profit By Type:

(All numbers are 2025 full-year numbers and don’t include miscellaneous.)

Services ~ $79.157B - 41.5%

Products ~ $111.582B - 58.5%

Combined Gross Profit ~ $190.739B

Analysis:

For every $1 of revenue, services account for $0.25 vs. accounting for $0.41 of every $1 of gross profit. Services’ disproportionate share of profits is due to their superior margins of 78% vs. products’ 38% margins.

Financial Picture:

Balance Sheet:

Apple has a comfortable balance sheet; though negative working capital, debt levels aren’t egregious, and total equity continues to climb. The most important and positive fact, though, is the persistent decline in outstanding shares, an initiative led by Tim Cook that has led to a ~(-2.3%) decline in outstanding shares per year.

Income Statement:

Over the last 6 years Apple has seen average YoY growth of net income of around +14.8% though this has fluctuated significantly. This growth has shown no sign of stopping as Q1 2026’s net income is up ~(+19%) YoY compared to Q1 2025, this being driven by growth in both products and services, but the long term trend shows services being a bigger percentage of gross profit when compared to products.

Cash Flow Statement:

Free cash flow growth has been modest and volatile, with share buybacks being the number one priority, but FCF per share has been growing consistently over the last six years at ~(+11%) per year, driven by fewer outstanding shares. You will see more about FCF later.

Apple’s financials show consistent and dependable growth in the long term, and non-manipulative financial statements with no accounting red flags found. Apple has a commitment to share buybacks as a reward to shareholders.

Management Rating:

Management is candid and communicative and, by all accounts, is trustworthy and dedicated to enriching shareholders. With Tim Cook being at the helm for the last 15 years, he has proven himself to be arguably the greatest CEO of all time or at the very least of this century. Cook’s capital allocation is second to none, with his systematic share buybacks being a prime example. Cook also stands out as an incredibly effective diplomat navigating Trump’s tariffs in both terms admirably, receiving exceptions for many products, though his biggest win is that he gained access to China in a way no other tech giant has, negotiating directly with Xi Jinping, allowing Apple to sell billions of dollars worth of phones in China and becoming a beloved brand there. The question is whether John Ternus will continue this operational excellency, which I believe he will for four reasons: One, the runway and margin of error Tim Cook left him; two, the guidance from Cook that Ternus has undoubtedly received; three, the fact that Cook is remaining on the board to continue his diplomatic endeavors; and four, the fact that Ternus will bring not only new abilities but also reintroduce an innovative and fearless mentality back into Apple.

Discounted Cashflow Analysis:

After calculating the average growth I project for Apple’s FCF in the future as well as calculating a discount rate of 7.5% and inputting all the required numbers into my DCF, I received an intrinsic value of ~$280 when at a 7.5% discount rate. Below is a sensitivity table:

Competition Rundown:

Apple has no 1-1 competitor that dominates in both products and services in the same market as Apple, but they do have competition in their various endeavors, the most direct being Samsung. Samsung and Apple directly compete over market share in the smartphone and wearables market. Apple dominates smartphones in the United States with 58% of market share, with Android dominating globally at ~73% of market share, and Samsung specifically having slightly more market share globally with 21.2% vs. Apple’s 21%.

Moat Analysis:

Apple’s ecosystem and brand give it a competitive advantage, with R&D and ecosystem lock-in allowing it to maintain this advantage. Not only does Apple provide products that work seamlessly together, but their plethora of services from iCloud storage to email to accounts to photos makes the switching cost incredibly high and often not worth it. The new MacBook Neo shows a priority in acquiring young and/or financially constrained consumers, hooking them on to Apple’s services earlier, and, as explained previously, Apple’s ecosystem makes for high switching costs, meaning that these new customers will likely remain customers for life.

Explaining the Ecosystem:

It is well documented and known that Apple has a robust ecosystem in which all its products work seamlessly together, making the users’ experience more enjoyable when all of their tech is from Apple. What is less known, though, is how inconvenient it is for customers to leave the Apple ecosystem, not because Apple makes it difficult but because of the difference in experience: your AirPods don’t seamlessly connect between phone and computer, and iWatch doesn’t work with your phone when you switch to Android, and arguably worst of all, all of the accounts you made on different websites and apps with your Apple email now have to be remade for your Android device. This video by Mrwhosetheboss documents the experience of switching from Apple perfectly. I recommend giving it a watch to truly understand what I’m talking about.

Final View:

Apple is a company with frontier products that serve as the conduit for their ultra-profitable services division. Apple’s spectacular management and capital allocation leave it in a great position to switch leadership much more smoothly than the last change of CEOs, which was due to Steve Jobs’ passing rather than a simple passing of guards. Their ecosystem is unparalleled, leaving a moat for years to come. My DCF values Apple at around $280, leaving no margin of safety because Apple is trading around $280 at the time of writing, though looking at my sensitivity chart, you could value it much higher, leaving up to a ~25% margin of safety, and whether that is enough for you depends on your investment methodologies. I don’t believe Apple carries heightened risk, and I think their best catalyst for growth in the future, or at the very least stability is their lack of investment in AI leaves them separated from the AI bubble, and in a position to pick up the pieces if/when it pops.

I believe a $230-$250 price point is much more appealing, leaving a good margin of safety, and you should consider having on your buy list at such prices.

Rating: Wait/Buy

DISCLAIMER: Nothing I say constitutes financial advise, I am not a financial advisor all investments carry risk including the complete and permanent loss of principal.

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