Yesterday I wrote a piece in which I questioned if the stock market has completely decoupled from reality. My point was that while the markets experienced a record fast -30% selloff, the rebound has been equally remarkable, despite the fact that we’ve entered a global recession and still don’t know how the COVID-19 crisis is going to end.
On Wednesday June 10th, as Nasdaq hit a new all-time high of 10,020, Apple also made history when its stock price went up to $352. With that price Apple became the first US company to reach a $1.5 trillion market capitalization.
Apple’s stock price (AAPL @ Nasdaq) from January to June 12th, 2020. Image: Google Finance.
Let’s think about the number 1.5 trillion for a moment. A trillion is a 1 with 12 zeros after it, and it looks like this: 1,000,000,000,000. Indeed, it’s a huge number and translates to 1,500 billion. In comparison, the budget of the Finnish State is around €60 billion euros, meaning that Apple’s market cap is about 22 times that.
There aren’t many companies in the world with that kind of valuations. In the US, only Alphabet, Amazon, and Microsoft have a market cap exceeding $1 trillion. They’re all big tech companies and one could of course ask what the valuations are based on.
Apple is a very profitable company and in the last earnings call they reported a cash hoard of $193 billion, despite the fact that they’ve bought back a lot of their own stock. With that cash pile they could fund the Finnish State for almost three years.
The valuation of Apple can’t however only be based on current revenues and profits. It also reflects how the stock market believes Apple will perform in the future. Obviously investors are bullish on Apple believing that they can continue to deliver fantastic products and services over time.
What could those new smash hits be? The latest big launch was Apple TV+ with a good chunk of original content, but I’m not entirely sure how big of a hit that has been. And once again in September we’ll see a new iteration of the iPhone with yet again improved camera, faster processor, and brighter screen.
Some people wrote that investors are excited about Apple’s rumored decision to switch over to Arm-based chips on Macs. Perhaps, but the Mac is still a relatively small product line compared to the iPhone. Speaking of investors, many of them have probably already completely forgotten about Apple’s autonomous electric car project codenamed “Titan”. That project doesn’t seem to be coming up with anything tangible any time soon.
Could it be the new AR glasses people have been speculating about? Apple and especially CEO Tim Cook seem very bullish on AR. Glasses certainly could become a new major product line with a significant software ecosystem around it.
Or could it be something else in the wearables category, with a connection to health and fitness? For example a new version of the Watch with the capability of monitoring your blood glucose levels? Or new AirPods that could measure your body temperature and perhaps some other vitals too?
Apple is known to be extremely tight-lipped about future products, so time will tell if they have something magical up their sleeve. The Apple developer conference WWDC is coming up later this month, so let’s see what’s revealed there, in addition to the widely expected announcement of Arm-based Macs.
With the current erratic behavior of the stock market, who knows what happens next. it could very well be that Apple hits the $2 trillion milestone a lot sooner than anybody thinks.