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Apple the First Trillion Dollar Company in Stock Market History

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In the lead up to Apple publishing its Q3 results on Tuesday a handful of the more optimistic analysts on Wall Street speculated that a strong report that came in well ahead of forecasts could propel Apple’s market capitalisation towards $1 trillion. The most optimistic posited that with strong headwinds the milestone could be reached within a week. It took 2 days. Yesterday, the iPhone maker’s shares closed at $207.39 in Wall Street, taking their combined value to exactly $1 trillion.

No company in history has ever had a valuation matching Apple’s current market worth, even taking into account relative value. With Amazon also reporting strongly a week earlier, Apple faltering now would likely have handed impetus in the race to $1 trillion to its giant tech rival. However, last year’s release of the $1000 iPhone X, which could quite easily have backfired by pushing loyalty to the iPhone brand too far, proved inspired. Despite slowing growth in the smartphone market, a natural development after a decade of runaway growth, the increased revenue and margins that resulted from the X helped boost the company’s income significantly.

Now, whatever happens over the coming months and years, and many believe that Amazon will overtake Apple as the world’s biggest company sooner rather than later, the latter will always have the kudos of that particular honour.

PetroChina was very briefly valued at around $1.1 trillion immediately after it IPO’d in 2007 but most of its stock was held by the Chinese government and is not considered to have been a genuine valuation based on free market forces. It’s now worth close to 20% of that at $220 billion.

Apple released the first iPhone in 2007, six years after the first iPod mp3 player was released, a product line that secured stability for a company that had been close to bankruptcy in the late 1990s. Since the original iPhone came to market, Apple’s share price has returned 1100%. Anyone who invested in 1980 when Apple made its debut as a public company has seen a return of 50,000%. Over the same period, the benchmark S&P 500 index has returned a total 2000%.

The question now becomes if Apple’s stock can hold above $1 trillion and, if so, what kind of returns might still be on the table for those investing online. With a valuation multiple of 15, compared to 25 for Microsoft and Amazon’s whopping 82, many analysts argue that Apple is actually the cheapest stock of all the major tech companies collectively known as the FAANGs.

However, while Amazon’s business is diversified across its online retail unit, quickly growing cloud computing as a service unit and content streaming unit Amazon Prime, Apple is more heavily reliant on its iPhone sales. Services such as its App Store and iCloud are producing growing revenue but are still heavily dependent upon iPhone sales.

Having recently signed up Oprah Winfrey to produce TV shows for an as yet undefined distribution channel, Apple is expected to soon move to rival Netflix and Amazon in the online content streaming market. To maintain its current position the company will almost certainly have to diversify into new, lucrative verticals over the coming decade but has the cash pile to do so. Regardless, Apple will now always be the first $1 trillion company in the history of the world.

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Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Paul

The author Paul