Apple (AAPL) has continued to make headlines through the year and for all the right reasons. The stock has surged 63.69% over one year and by 50.8% year-to-date, in what has been a record-breaking run. The Samsung Galaxy Note 7 fiasco last year may have given Apple an edge, but for the Company’s market cap to break the $900m mark, it takes more than Samsung’s 2016 woes to get there.
Last Wednesday’s intraday record high and a closing $904bn market cap came off the back of some quite impressive earnings. The Company’s 30th September fourth quarter earnings per share came in at $2.07 with revenue of $52.6bn. While the numbers came in well ahead of expectations, more impressive is the more than $260bn sitting in cash and long-term marketable securities. In fact, there appear to be no chinks in the armor at present.
Revenue numbers topped estimates, supported by strong iPhone 8 and Mac sales. Apple’s sales forecast for the current quarter is in excess of $80bn, which would be a record for the company. More importantly, gross profit margins are forecasted to widen from 38% to 38.5% The upbeat projections came ahead of the launch of the iPhone X. There are high expectations for Apple’s latest product offering to give the Company a good run at the $1tn mark. The iPhone X has sizeable orders and is expected to see strong demand well into next year. An added bonus is that the iPhone 8 Plus is also selling better than forecasted. What else is coming from the Apple core over the near-term?
News hit the wires of Apple’s pay cash system entering beta testing. The software will allow users to send and receive cash using iMessage and it’s expected to go live before the end of the year. A new iPad Pro with facial recognition is also on its way.
While there’s plenty of good news, Apple’s latest iOS bug grabbed the tech headlines. The bug caused the Apple’s ‘i’ to become an A and ? in writing. A fix has since been released. Telling your friends you had just bought the iPhone X would have been A&?Phone X. And then there are the reports of the iPhone X being the most breakable of the iPhones. None of this seems have deterred the consumer and the insatiable appetite for Apple’s offerings.
It’s been a long road, but for Apple, it’s not just the technology and the software that has given the company the mantle of being the largest in the world by market cap. Product design and the entire ecosystem that Apple has created with iTunes, iCloud, the App Store and the rest is another major factor. Once you’ve moved into the world of Apple, it’s more than a challenge to move to an android.
Many had been a little too hasty in writing off the company following Steve Jobs’s passing. The company’s performance and continued advancement demonstrate quite clearly how well Jobs and the rest of the management team instilled the values and the vision. To put it into perspective, Apple’s market cap has risen from just under $350bn to its current $896.81bn (as at 10.11.17) under CEO Tim Cook.
Brand value and the very fact that the Company sits at the top of the pile of the world’s largest companies has given the company the image and prestige that Steve Jobs would have desired. It’s the iMac today, but soon it will be the iCar and even the iBot.
The big question that remains is whether Apple Inc. can be the first of the current heavyweights to hit the Trillion Dollar mark. Google’s Alphabet Inc. (GOOG) is the closest listed rival with a market cap of $719.48bn (as at 10.11.17). Apple looks well placed and if its earnings forecasts prove to be accurate, odds are stacked in its favor. There’s just one issue. Talk of Saudi Arabia’s Aramco IPO is still doing its rounds, with the crowned prince having put the value of the company at $2tn. It’s unsurprising that the seller would tag it on the higher side. More reasonable valuations by analysts have ranged from between $1tn to $1.5tn. There’s no guarantee that the IPO will happen, but if it does Apple could find itself trailing by quite a gap.
For now, the demand is in the iPhone X, but Apple’s shares may also get a boost for reasons outside of its revenue earnings and forecasts. Trump’s tax reform bill will be of particular interest to Apple, which has the more than 90% of its cash and marketable security holdings offshore. It’s not surprising when considering that more than 60% of Apple Inc.’s net sales come from non-U.S markets. Expectations are that the repatriation would lead to greater investment and innovation and possibly a greater dividend yield. The market sensitivity over tax reforms saw Apple’s market cap fall below $900 by Friday’s close. If Trump delivers alongside Apple’s iPhone X, it could be within touching distance of the $1tn mark by the end of the holidays.