Thu. Jan 20th, 2022


Apple became the first company to achieve a market capitalization of $ 3tn, after its value increased by $ 1tn in less than 16 months when the coronavirus pandemic boosted Big Tech turbo.

The iPhone maker became a $ 1 billion company in August 2018 and two years later the first company valued at $ 2tn. On Monday, shares of the company rose 3 percent to $ 182.86, taking it past the latest milestone, before falling back to trading at $ 182.

Apple recently lost its title as the world’s most valuable company Microsoft at the end of October. However, a strong rally in November restored its crown. It then rose higher until the end of 2021 and has added half a trillion dollars to its market value since November 15th.

Only a handful of companies are worth more than $ 1tn, including Tesla and Amazon. Google parent Alphabet and oil group Saudi Aramco are valued at about $ 2 billion, while Microsoft’s market value is about $ 2.5 billion.

Apple’s share rose more than 30 percent in 2021 deftly navigate the supply chain crisis and benefited from extra demand during the pandemic for iPhones, Macs and iPads as customers upgraded their home offices.

The stock jumped in early December after analysts at Morgan Stanley raised their 12-month price target to $ 200, arguing that investors had not yet priced in the expected launch of augmented and virtual reality devices.

Moody’s also upgraded Apple to triple-A in December, making it only the third triple-A company rated by the rating agency, along with Microsoft and Johnson & Johnson. S&P Global still rates Apple at AA +, a notch below AAA.

Tom Forte, analyst at DA Davidson, said investor enthusiasm for Tesla and electric vehicles is also spilling over into Apple’s inventory, hoping the iPhone maker will enter the automotive industry in the next half-decade.

There was also a lot of activity around Apple in the derivatives markets, as traders bet that the stock would continue to rise.

Apple’s market value has now grown by almost $ 2.7tn in a decade under Tim Cook’s leadership, an achievement that surprised critics who questioned his credentials after taking over from Steve Jobs.

Cook’s success has since been built on his behind-the-scenes ability to manage supply chains and sell products in large numbers, while averting regulatory and political threats in Washington, Brussels and Beijing.

“Cook was seen as a safe but rather conservative bet,” says Ben Wood, chief analyst at CCS Insight. “But what he delivered is nothing short of astonishing. He has made the iPhone franchise the most lucrative item of consumer electronics in history. ”

Katy Huberty, an analyst at Morgan Stanley, noted that Apple’s share price has risen by about 500 percent over the past five years alone, outperforming the S&P 500, which has risen about 105 percent over the same period.

As a result, Apple is now trading at a historically high price-to-earnings ratio above 30, up from a three-year average of 23.4, according to DA Davidson.

But few analysts believe the stock is in bubble territory. Of the 45 analysts that Apple covers, 35 rate it as a buy and two consider it a sale, according to Bloomberg.

The bullish outlook reflects how Apple was revalued by Wall Street to take into account its high-margin ballooning business that generated recurring revenue and broke its reliance on iPhone replacement cycles.

Apple, which earned more than $ 1 billion in revenue per day in the financial year ended in september, now has 745 million paying subscribers on an ever-growing range of services, including music streaming, video on demand and fitness, and warranty coverage.

Its services business has generated nearly $ 70 billion in revenue over the past year, double that of four years ago. In the previous quarter, margins at the unit reached a record high of 70.5 percent, more than double the margin on hardware sales, according to Evercore ISI.

One of the biggest risks for Apple and its share price is that the pillars of the service business are reversed by policy changes.

Lawmakers in Washington have raised questions about the estimated Payment of $ 8 billion- $ 12 billion every year that Alphabet gives for the fact that Google Search is by default on its devices, while others have targeted the Apple App Store’s business model to take a 15-30 percent reduction on some transactions.

So far, Apple has emerged relatively unscathed. In the US, Epic Games sued last year for allegedly operating an illegal monopoly, but Epic lost on nine out of 10 charges. When Apple appealed the one loss, a higher court granted his request and postponed the lower court’s order to open the App Store to competing payment platforms.

Meanwhile, Apple has also significantly diversified its hardware offerings to AirPods, Apple Watches and other accessories.

Huberty noted that the market for “portable items” such as the Apple Watch barely existed in 2014, but is now a “$ 38 billion enterprise – the size of a Fortune 120 company”.

Additional post by Joe Rennison and Eric Platt in New York



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