Ap­ple inches closer to be­com­ing first $1 tril­lion com­pany

The Sunday Guardian - - Business - REUTERS

Ap­ple is on the verge of be­com­ing the first $ 1 tril­lion pub­licly listed US com­pany, but even if it gets there, it could soon be over­taken as Ama­zon.com surges from be­hind.

Started in the garage of co­founder Steve Jobs in 1976, the iPhone maker’s an­nual rev­enue has bal­looned to $229 bil­lion, greater than the gross do­mes­tic prod­uct of coun­tries in­clud­ing Por­tu­gal and New Zealand.

Ap­ple’s mar­ket cap­i­tal­i­sa­tion on Thurs­day topped a record $934 bil­lion, fol­low­ing its un­veil­ing last week of a $100 bil­lion buy­back bud­get and news that War­ren Buf­fett’s Berk­shire Hath­away dra­mat­i­cally in­creased its stake in the com­pany.

Thanks to a 12% rally since its quar­terly re­port last Tues­day, the Cu­per­tino, Cal­i­for­nia com­pany is just 8 % short of hit­ting the $1 tril- lion val­u­a­tion mark.

Point­ing to Ap­ple’s re­cent 31% jump in ser­vice rev­enue, in­clud­ing mu­sic stream­ing and on­line stor­age, CFRA an­a­lyst Angelo Zino on Wed­nes­day upped his tar­get price for the stock from $195 to $210, which would put Ap­ple’s mar­ket cap­i­tal­i­sa­tion at $1.03 tril­lion. Zino joins at least 12 other an­a­lysts with price tar­gets putting Ap­ple’s stock mar­ket value at 13 dig­its.

But Ap­ple is in dan­ger of be­ing beaten to the $ 1 tril­lion mark—or passed soon af­ter— by Ama­zon. com, the sec­ond largest listed US com­pany by mar­ket value, at $780 bil­lion.

Saudi Ara­bian au­thor­i­ties, mean­while, have said they ex­pect a planned in­ter­na­tional initial pub­lic of­fer­ing of Saudi Aramco that would value the na­tional oil pro­ducer at about $2 tril­lion.

While $148 bil­lion smaller than Ap­ple on Fri­day, Ama­zon of late has ex­panded its stock price, and its sales, much more quickly than Ap­ple. Ama­zon’s stock is red hot, trad­ing re­cently at over 100 times ex­pected earn­ings, com­pared to more-prof­itable—but slower grow­ing— Ap­ple’s val­u­a­tion of 15 times earn­ings.

Ap­ple’s stock has risen 24% over the past year, fu­eled by op­ti­mism about the iPhone X, the com­pany’s lat­est smart­phone. But de­mand for the $ 1,000 de­vice has un­der­whelmed in­vestors, and bulls are now fo­cused on Ap­ple’s plan to re­turn more cash to share­hold­ers.

By com­par­i­son, Ama­zon’s stock has surged 70% over the past 12 months, bol­stered by 31% rev­enue growth as more shop­ping moves on­line and busi­nesses shift their IT de­part­ments to the cloud, where Ama­zon Web Ser­vices leads the mar­ket.

Ama­zon is also com­pet­ing more with Ap­ple and Google owner Al­pha­bet as it sells mu­sic and video con­tent, its Fire TV de­vice and its Alexa smart home gad­get.

At $765 bil­lion, Al­pha­bet has the third largest mar­ket cap­i­tal­i­sa­tion on Wall Street, with Mi­crosoft close be­hind at $749 bil­lion. Ama­zon breezed past both them both in Fe­bru­ary.

In­clud­ing Face­book, the five largest listed US com­pa­nies now ac­count for 15% of the S&P 500’s $24 tril­lion mar­ket cap­i­tal­i­sa­tion.

To be sure, past stock gains are not a re­li­able pre­dic­tor of fu­ture per­for­mance, and the surge in Ap­ple’s and Ama­zon’s shares in re­cent years has been ex­cep­tional by most stan­dards.

But if Ap­ple’s stock were to keep grow­ing at the pace seen over the past year, the com­pany’s mar­ket cap­i­tal­i­sa­tion would hit $1 tril­lion in Septem­ber. Ama­zon would reach $1 tril­lion around Oc­to­ber if its stock price con­tin­ued to rise at the same rate as the past year, and over­take Ap­ple soon af­ter.

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