Profit growth still outpaces share price

APPLE’S market capitalisation has topped $500 billion (R3.7 trillion) for the first time, cementing its lead as the most valuable business and reaching heights not seen by any company since the last recession.

The shares rose 1.3 percent to $542 on Wednesday, lifting its market capitalisation to $506bn. Apple has risen 34 percent in 2012, after gains in each of the past three years. The firm is now worth $98bn more than the second-most valuable business, Exxon Mobil.

Apple investors expected a sales boost from its latest ipad tablet, due for release on Wednesday next week. They were also banking on a new iphone by the third quarter and a possible dividend, the first since 1995, said Howard Ward, a manager at Gamco Investors.

Demand for Apple’s products had helped the firm boost profit faster than its stock price, making the price:earnings ratio (p:e) more favourable.

“Impressively, its market cap has risen to the $500bn level as its p:e multiple has actually contracted,” Ward said. “At 12 times this year’s earnings (forecast), it stands in stark contrast to the experience of Cisco Systems, which sold at over 100 times earnings when it approached the $500bn level in 2000.”

After trading near the halftrillion-dollar mark during the dotcom era, Cisco has tumbled to a market cap of $107bn. The last US group valued at $500bn was Exxon in April 2008. The Texas-based energy producer now trades for $408bn.

Under Steve Jobs, Apple became a leader in consumer electronics. The company has maintained its growth since Jobs’s death in October, reassuring investors that Apple can continue updating products and pioneering new markets.

“Apple (indicates) where the markets are going,” said Mark Bronzo, a manager at Security Global Investors. “Their products tend to lead, and everyone tends to follow.”

Apple posted net income last quarter of $13bn, one of the highest quarterly profits on record, putting it in the same league as Exxon and Gazprom. The quarterly profit a share of $14 was more than Apple earned in any full year before 2010. Sales rose 73 percent to $46bn.

The results also marked the first time revenue topped Hewlett-packard’s, underscoring how Apple’s focus on sleek, touch-screen mobile devices has rearranged the technology industry’s pecking order.

Net income, meanwhile, exceeded total revenue at Google, Apple’s largest rival in mobile operating systems.

Chief executive Tim Cook is