Apple Makes History with a Market Capitalization above $3 Trillion
In a groundbreaking achievement, Apple (AAPL.US) has become the first company in history to reach a market capitalization of over $3 trillion. This remarkable milestone comes as the tech giant’s shares rose by 2.3% on Friday, contributing to a staggering $983 billion increase in its market value this year alone. Apple’s impressive performance has also played a pivotal role in propelling the Nasdaq 100 to its best first-half record ever, highlighting the dominance of tech giants in the market.
The unexpected surge in Apple’s market capitalization has left many strategizers baffled, leading to questions about the feasibility of potential rate hikes. Nevertheless, investors continue to remain enthused about the prospects of artificial intelligence and are drawn to Apple’s attractive qualities, including its robust balance sheet, dependable revenue streams, and strong competitive position.
Jonathan Curtis, director of portfolio management at Franklin Equity Group, attributed Apple’s consistent outperformance over the past decade to its sound business strategy and successful earnings plan. Curtis emphasized the growing influence of consumers, who interact with Apple’s products numerous times a day, generating substantial traction for the company’s platform businesses, consistent dividend growth, and aggressive buyback program.
Citigroup (NYSE:.US) recently initiated coverage on Apple with a “buy” rating, underscoring their belief that the company’s potential to expand profit margins is undervalued. Citigroup predicts a remarkable 30% upside for Apple, which would bring its valuation closer to $4 trillion.
Apple has been at the forefront of the market for quite some time. In 2011, when its market capitalization stood at under $340 billion, equivalent to 3.3% of the S&P 500, Apple emerged as the world‘s most valuable stock. Since then, Apple has consistently held this leading position. The company reached a market cap of $1 trillion in mid-2018 and hit $2 trillion in August 2020, becoming the first U.S. company to achieve such a milestone. Only Saudi Aramco has achieved a market capitalization of $2 trillion.
Although Apple briefly surpassed the $3 trillion mark in early 2022, it did not close above that level at the time. This initial feat was followed by a downtrend, which has now been entirely eradicated.
Companies of this magnitude are few and far between. Within the United States, only a handful of companies belong to the “trillion club,” including Alphabet (GOOG.US, GOOGL.US), Amazon (AMZN.US), Nvidia (NVDA.US), and Microsoft (MSFT.US), with the latter having a market value exceeding $2 trillion.
While Apple may not be the company that has experienced the highest stock price surge this year, with Nvidia, Meta (META.US), and Tesla (TSLA.US) all doubling in value, its colossal size grants it significant influence in the market, accounting for 7.7% of the weight of the S&P 500 Index.
However, reaching this milestone does not guarantee a smooth journey for Apple going forward. The stock’s forward earnings multiple currently stands at approximately 30 times, which is a decrease from its 2020 peak of 35 times but still surpasses its 10-year average multiple of 17.9 times.
Although Citi maintains a bullish outlook on Apple, other analysts hold more skeptical views about the stock. Less than 70% of institutions have invested in Apple, marking the lowest ratio among trillion-dollar market capitalization stocks. Furthermore, the consensus rating, reflecting “buy,” “hold,” and “sell” recommendations, is nearing its lowest level since November 2020, with UBS’s recent downgrade being the latest example. Apple’s current share price of $193.97 already exceeds the average price target, indicating that analysts do not anticipate significant additional gains at present levels.