Apple sits at the top of the tree after hitting $2trn market capitalisation

The technology giant has become the first US company to reach a market value of $2trn. But its life may get harder now.

It took Apple almost 40 years to reach a market value of $1trn. But it took it just two more to hit $2trn, says Jack Nicas in The New York Times. Last Wednesday its shares climbed 1.4% to $468.65, making it the first US corporation to push through the $2trn barrier and cementing its title as the world’s most valuable public company. This is a “new milestone” for the group, which was established in 1976 and floated in 1980. It has been responsible for “world-changing products”, such as the Macintosh computer, the iPod and the iPhone.

The most important of these products was the iPhone, says Ben Martin in The Times. Launched in 2007, it created a brand “so strong and so consistent” that people “just got locked in”. It has a “minimal” attrition rate, because “once you’ve got an iPhone you just don’t switch”. 

However, Apple’s more recent success has been due to the expansion of its services division, which has reduced the group’s reliance on smartphone sales; these now account for less than half of overall revenues. Apple’s “plethora of offerings”, including its App Store, music service and Apple Pay, also gives it a “recurring revenue stream”.

Riding the tech wave

Apple has also benefited from the general surge in technology stocks that has taken place since March, says Amrith Ramkumar in The Wall Street Journal. With “few attractive alternatives” to large tech stocks, many experts expect “other tech behemoths” to join Apple in the $2trn club. Amazon and Microsoft are currently valued at around $1.6trn, while Facebook’s market capitalisation is $750bn.

Don’t count on it, says the Financial Times. It’s true that investors have shown a “big appetite” for Big Tech in recent months as the world has turned to technology to “stay connected”. Apple has also so far managed to defy the “traditional arc” of a pioneering business by staying ahead of the field. 

However, the entire sector is threatened by tighter regulation amid heightened concerns over Big Tech’s “increasing dominance”. Some suggest that tech giants “should be subject to the same regulatory burden as traditional public utilities”, while Apple’s Chinese revenues and manufacturing operations could be hit by any US-China trade war.

In any case, while Apple might be a “great company” its shares aren’t necessarily a good investment, says John Authers on Bloomberg. The stock trades at 35 times forward earnings, the highest valuation since 2007. This seems “over-optimistic”. Plenty of growth is already priced in, while it will henceforth be difficult to find a new product to act as a “game-changer” like the iPhone. The price/earnings ratios of the other four technology stocks (Facebook, Amazon, Netflix and Alpahabet/Google) are also in “nosebleed” territory.

Recommended

US stockmarkets shrug off the mob's rampage through the US Capitol building
US stockmarkets

US stockmarkets shrug off the mob's rampage through the US Capitol building

US stockmarkets seem more interested in the results of Senate elections in Georgia than on the lawless mob's raid on the country's Capitol building.
14 Jan 2021
DoorDash won't deliver for investors. Here's how to short it
Trading

DoorDash won't deliver for investors. Here's how to short it

American food-delivery app DoorDash can’t even make money in a pandemic. Matthew Partridge explains the best way to short it.
20 Jan 2021
Five online retail stocks to diversify your portfolio with
Share tips

Five online retail stocks to diversify your portfolio with

Professional investor Tancredi Cordero, founder and CEO of Kuros Associates, selects five of his favourite online retail stocks to buy now.
18 Jan 2021
Why investment forecasting is futile
Investment gurus

Why investment forecasting is futile

Every year events prove that forecasting is futile and 2020 was no exception, says Bill Miller, chairman and chief investment officer of Miller Value …
18 Jan 2021

Most Popular

Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Prepare for the end of the epic bubble in US stocks
US stockmarkets

Prepare for the end of the epic bubble in US stocks

US stocks are as expensive as they’ve ever been. How can you prepare your portfolio for a bubble bursting?
18 Jan 2021
The best investment trusts to buy for 2021
Investment trusts

The best investment trusts to buy for 2021

Sectors ranging from emerging markets to student accommodation look poised to do well this year, says David Stevenson, as he picks the best investment…
19 Jan 2021