First company to $1 trillion: Apple zeroes in on historic market cap for ultimate 'icing on the cake'

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For the past few months, Apple has flirted with the possibility of becoming the first company ever to reach the once-thought-impossible $1 trillion market capitalization.

Now, after stronger-than-expected earnings announced on Tuesday and Warren Buffett doubling down his confidence with a major stock purchase, the Cupertino tech giant is an arm's length distance from the ultimate stock market summit. Apple's share price on Friday reached its all-time high of $183.83, and with about 5.07 billion shares on the market, the company's market cap currently sits at about $931 billion.

Analysts and longtime Apple watchers are bracing for the moment Apple reaches the $1 trillion valuation, a reality that could occur within a matter of months or even weeks. One analyst predicts the accomplishment will come when Apple introduces its three new models of iPhones, due to be released later this year.

It will be a symbolic accomplishment, without any intrinsic important other than as a reminder of Apple's astonishing success. But oh, what a symbol.

"It would be icing on the cake," said Dan Ives, chief strategy officer and head of technology research at GBH Insights. "It's symbolic. It's historic. I think that, going into September, there's a very good likelihood that they will hit $1 trillion with the next iPhone product cycle."

To reach the $1 trillion threshhold, assuming the number of its shares in the market stays flat, Apple needs to hit a of $197.24. Apple could do that soon, with its current share buyback plan and a second planned buyback, for which Apple plans to pay up to $100 billion using its recently repatriated offshore cash. With buyback plans, the amount of Apple shares on the market will decrease, most likely boosting the stock's value even more.

The new tax reform law and a healthy earnings report Tuesday, which sent stocks soaring 3.5 percent when the market opened Wednesday, have contributed to Apple's rising valuation in 2018. Then the company saw its prices reach historic highs Friday, following revelations of Buffett's move. In an interview with CNBC, the billionaire investor said his company Berkshire Hathaway bought about 75 million shares of Apple stock in the first three months of 2018. In total, Berkshire Hathaway owns 241.7 million Apple shares worth more than $44 billion.

"It's an amazing business," said Buffett. "You can put all their products on a dining room table. That's not the way it used to be in this country. It's incredible to me."

In its earnings call for the quarter accounting January to March, Apple said it sold 52.2 million iPhones, beating Wall Street's skepticism and notching a 14 percent increase in sales from a year ago. But Apple saw its biggest growth in its services sector—which includes Apple Music, App Store and Apple Pay—with a 31 percent increase year-over-year.

"When you look at the combination of Apple, and Buffett buying the stock, that's naturally going to provide a lot of upside to its value," said Angelo Zino, an analyst with CFRA Research. "The iPhone business is holding up. Services are a key going forward. With that going on, we think they're headed that way (to $1 trillion mark)."

When Apple does reach that mark, the impact will be strictly psychological, according to IDC research analyst John Jackson. But he notes that the moment will serve as an important benchmark in Silicon Valley's history, especially when comparing Apple to other tech giants, such as Amazon ($764.2 billion and quickly rising), Google's parent company Alphabet ($729.2 billion) and Facebook ($518.1 billion).

As companies such as Facebook wrangle with how to build its business while respecting user data privacy, Apple stands out as a company that has taken a "high ground on privacy issues," according to Jackson.

"I think with (Facebook CEO) Mark Zuckerberg testifying in front of Congress and Cambridge Analytica scandal, this throws into stark contrast the mega-tech companies that's focused on building data like Facebook and mega-tech companies that's focused on building future on product like Apple," said Jackson. "Apple can be an example of the biggest tech that doesn't use your data to target ads."


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May 05, 2018
Compare Apples steady growth to that of Facebook or Tesla.

A technology company run by competent technocrats in a culture that rewards merit.

Versus companies run by show-boating entrepreneurs.

And selling stock short in a self-defeating financial strategy. Unless you are in on the cozy cabal of insider-trading.

An important clue? The interest rates your broker is charging you to "loan" you the shares you are selling short.

And the fees they charge you both when you sell and buy shares.

May 06, 2018
You cannot increase a company's evaluation by using stock repurchases alone. The decrease in the number of shares matches the corresponding increase in stock price.

On the other hand who knows what effect psychological factors might play. If the market believes the buyback was a good idea, the stock price might increase a little more than justified by the buyback. But even then, I cannot see a huge effect there.

Nope, I strongly suspect that Apple will need to increase sales and profits even more to get that stock price up. It is already at astronomical levels even if Buffet is giving it a vote of confidence. After all, with the amount of stock Buffet already owns, he is quite incentivized to talk up the price any chance he gets.

May 06, 2018
Parsed, I agree with your assessment from a stock market driven viewpoint. But that misses why Apple shares steadily gain in value.

All technology producers, Apple has it's share of stinkers & failures in their product lines.

You need to consider the perception by their customer base that they are purchasing products of superior quality to Apple's competitors. That perception has been enough to sustain Apple's market-share. Often criticism of the Apple sandbox is by people who will always chose lower prices over reliable value.

Would you prefer to sell 500 million phones for $100 retail each? Or 50million iphones at a $1,000 retail each?

That is gross of course. Now start deducting your costs of materials, transport, manufacturing, distribution, retailing. After market costs of customer service, OS upgrades, replacing defective units, advertising, A market-share of 500 million phones sold doesn't leave you more than pennies of gross profit from $100.

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