There’s a very good chance Apple will hit the trillion dollar mark in the next few years, and in the process become the first company to earn the coveted 13-digit valuation.
Apple’s been the frontrunner in the race to one trillion and the iPhone is by some measures the most successful product of all time. Similar buzz about Apple has flared up among market observers and investors in the past, but its recent blowout performance in the stock market has brought it much closer to the finish line, fueling renewed speculation.
It’s hard to overstate how stunning the past few months have been for Apple shares, which are up nearly 25 percent this year. The shares closed at $109 on November 7 of last year. Since Trump’s election, they’ve surged to $144, bringing Apple’s market capitalization from $573 billion to $757 billion in just a few short months. Not only is the iPhone maker valued at three quarters of a trillion dollars, it’s about $160 billion ahead of Google, which is the US’s second most valuable company with a market cap of $590 billion.
According to Fortune, the company needs to grow another 32% or so to hit the magic number, with its stock trading at about $190. Assuming its stock continues grows steadily at around 6% a year, Apple is due to reach a trillion in four years, in 2021, according to Fortune’s Shawn Tully.
What’s Driving Apple’s Meteoric Surge?
The driving force behind this historic surge is the highly anticipated debut of Apple’s tenth anniversary iPhone (i.e. the iPhone 8, iPhone Edition, or iPhone X) that has Wall Street drooling. The rampant rumors about slick new features like wireless charging, facial recognition scanning, and augmented reality capabilities have investors betting that the next iPhone will be a home run that drives a massive upgrade cycle.
Warren Buffett has also doubled down on Apple in a big way, purchasing 120 million shares in the company since the beginning of this year through his investment firm Berkshire Hathaway. The legendary investor, who now owns around 2.5% of outstanding Apple shares, marveled at how “sticky” the iPhone was and suggested that Apple may become the first trillion dollar company.
“Apple strikes me as having quite a sticky product, and an enormously useful product to people that use it” Buffett said to CNBC while explaining his $17 billion stake in the iPhone maker. Adding to the iPhone’s stickiness is Apple’s ever-expanding platform of digital services and iOS ecosystem, which help keep consumers upgrading within the iPhone line.
In any case, there’s a lot riding on the next Apple flagship, given the slowdown in sales of its iPads and Apple Watches. According to CNN Money, iPhone sales account for 70% of the company’s revenue.
The other catalyst for Apple’s growth has been Trump– whose election fueled a massive market rally dubbed the “Trump Bump”– which is ironic given the number of social issues on which the two fundamentally disagree. Trump has pledged to reform the tax code and make it cheaper for companies to bring their cash hoards back from their overseas caches. Apple is believed to be holding a stunning $230 billion in cash outside of the US, which CEO Tim Cook has refused to repatriate until the US corporate tax rate is lowered. If Trump follows through on tax reform and Apple brings back its massive cash pile (which is worth more than Coca Cola), it could pour that money into expanding its research and development activity and acquiring tech companies, which could in turn help it find its next iPhone, bringing the company over the trillion dollar mark.
Other Contenders for the Trillion Dollar Title
Apple is far and away the closest to reaching a trillion dollar value first, but it’s not without competition. Amazon is also seen as a viable contender to that vaunted title.
According to Barclays, Amazon will be among the first to be worth one trillion dollars. “AMZN is likely to be one of the first trillion-dollar market cap companies; it’s just a question of when, not if, in our view”, the Barclays team wrote in a note to clients this week. The e-retail giant’s stock has skyrocketed by more than 48% in the past year. Thanks to the surge, its founder and CEO Jeff Bezos is now the world’s second-richest man, overtaking Buffett. If it keeps that breakneck growth pace up, it will hit the trillion dollar mark in a little over two years, according to Fortune’s Lucinda Shen, though that’s a very tall order.
Google’s parent Alphabet is also high up on the list of contenders as the second largest US company by market capitalization, but it has a ways to go. Its stock needs to grow 72% to hit a thirteen-figure valuation, according to Shen, whereas it grew 11% in the past year.