Business Essentials for Professionals


Apple’s Market Value Nearing The Historic $3 Trillion Mark

Apple’s Market Value Nearing The Historic $3 Trillion Mark
On Monday, Apple Inc's market valuation was just short of $3 trillion as the stocks of the iPhone maker continued its spectacular run over the previous decade. The company has been classified already as the most valuable firm of the world.
On Monday, the share prices of the company dropped slightly by just a little more than 2 per cent and settled at $175.74. That erased its previous advances that saw the stock getting close to the $182.86 price that is needed for the company’s market value to reach the $3 trillion mark.
Last week, Apple's stock surged by 11 per cent as it extended the surge in its stock price by more than 30 per cent so far this year. Investors remained largely optimistic that wealthy customers will continue to pay top price for iPhones, MacBooks, and services such as Apple TV and Apple Music.
The iPhone maker led a group of megacap tech companies that benefited from people and businesses relying heavily on technology during the pandemic, rising from $2 trillion to near $3 trillion in market value in 16 months. These companies included Google parent Alphabet Inc and Inc.
In example, Apple took two years to get from $1 trillion to $2 trillion in market capitalization.
"It's now one of the more richly valued companies in the market, which shows the dominance of U.S. technology in the world and how confident investors are that it will remain in Apple’s hands," said Brian Frank, a portfolio manager at Frank Capital who sold his long-standing position in Apple in 2019 as the stock's valuation rose. "It seems like the stock has priced in every possible good outcome."
According to Daniel Morgan, senior portfolio manager at Synovus Trust Company, new revenue sources for the company that investors expect include a potential Apple Car, as well as growth in service categories such as apps and TV, which are still well lower than the 65 per cent of the company's revenues generated by iPhone sales.
Chief Executive Tim Cook, who took over after Steve Jobs quit in 2011 and overseen the company's development into new products and markets, would be ecstatic to surpass the $3 trillion barrier.
"Tim Cook has done an amazing job over the past decade, taking Apple's share price up over 1,400%," OANDA analyst Edward Moya said.
Since the 1990s, Apple shares have gained 22 per cent each year, whereas the S&P 500 index has only gained just under 9 per cent per year.
If Apple reaches the $3 trillion mark, Microsoft  Corp will be the sole MNC remaining in the $2 trillion group, with Alphabet, Amazon, and Tesla Inc having reached the $1 trillion mark.
Microsoft, with a market capitalization of $2.6 trillion, was the company with the highest market capitalization in the world until late October, when Apple warned that supply chain issues might stymie its growth for the rest of the year.
As firms transitioned to a hybrid work paradigm and consumers upgraded their gadgets, stocks of large technology companies have surged this year, with investors leveraging increased demand for cloud-based products.
The Nasdaq 100 index, which is dominated by huge corporations like Apple, is up over 26% this year, while the S&P 500 index is up around 24%.
As the global economy recovers from the coronavirus epidemic and supply chain pressures lessen, emerging technologies such as 5G, augmented reality/virtual reality, and artificial intelligence may help Apple and other cash-rich major technology firms stay popular with investors.
"I am in the camp that are experiencing another 'Super Cycle' with the iPhone12/iPhone 13 franchise," wrote Daniel Morgan, senior portfolio manager Synovus Trust Company, in a note. "And that AAPL is lifting off to another string of quarters with strong revenue and profit growth."

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc