Apple: The First $1 Trillion Company?

Today, a single share of Apple reached a record new high: $500. In October 2010, shares of Apple closed above $300. Less than a year later (July 2011), they hit $400.

Apple campus

An Economix article last week put the company’s value in perspective:

Here are a few other comparisons:

  • With a market value of about $460 billion, Apple is worth more than Google, Goldman Sachs, General Motors, Ford, Starbucks and Boeing combined.
  • Apple is now worth almost twice as much as Microsoft (about $258 billion) and more than twice as much as Google ($198 billion).
  • It is also worth more than twice as much as General Electric (about $202 billion), I.B.M. (about $224 billion) or Wal-Mart ($212 billion).
  • Apple — ranked 35th in the Fortune 500, which is based on annual sales — is worth eight times as much as the company just below it on the Fortune list (Boeing, at about $56.5 billion). Its value is 20 times as much as the company just above it (Medco Health Solutions, about $23.4 billion).

via Apple Stock’s Lofty Heights, in Context: Economix [2012-02-09].

That first bullet point bears repeating: Apple is worth more than Google, Goldman Sachs, General Motors, Ford, Starbucks and Boeing combined.

And the company is still growing.

Given the trajectory of Apple stock, there’s a chance the company could hit the $1 trillion mark this decade, making it the most valued company in history.

How likely is the possibility? Consider this:

In 2006, Apple stock rose 18%. In 2007, it jumped 133%. The stock price fell 56% in 2008, but bounced back 147% in 2009. In 2010, it rose 53%. If the company’s five year average 59% annual growth rate continues, Apple could be worth $1 trillion in as little as three years [1]. Using a more conservative annual growth rate of 23%, Apple will hit $1 trillion by 2017.

In a Marketplace report today, Panos Mourdoukoutas, professor of Economics at Long Island University, contended that only market rookies look just at a stock’s price.

This idea that the stock is cheap or expensive, it’s actually useless. [Even at $502], Apple is a very inexpensive stock.

Besides share value, you also have to look at a company’s earnings.

And Apple’s earnings are impressive. Last month, the company announced financial results for its fiscal 2012 first quarter, posting a record quarterly revenue of $46.33 billion and record quarterly net profit of $13.06 billion [2]. Compared to 2011, Apple revenues increased by 73% and profits by 117%.

And why stop at $1 trillion? Last year, James Altucher at MarketWatch maintained that Apple is going to be the world’s first $2 trillion company. Or is it $3 trillion?

All these financial numbers aside, I think there are several really good (and as-of-yet unreleased) reasons to own Apple stock: iPad3, iPhone5 and Apple TV. Nevertheless (and yes, you can call me a market rookie), $500 bucks is still a lot to spend for a single share of stock, even if it is for stock in a $1 trillion company.

References

  1. Can Apple reach $1 trillion in market value? It’s possible. USA Today. 2011 Apr 18.
  2. Apple Reports First Quarter Results. Apple. 2012 Jan 24.

Walter Jessen is a digital strategist, writer, web developer and data scientist. You can typically find him behind the screen something with an internet connection.

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