Apple has just reached a $900 billion value:
https://www.thestreet.com/story/14374296/1/apple-set-for-900-billion-valuation-after-blowout-earnings-iphone-x-forecasts.html
But I don’t see why: the markets Apple is in are in like smart phones, tablets, personal computers are getting close to mature; buyers can get quite adequate technology much cheaper, and since Jobs died Apple has done little in developing new technologies–just improvements in existing products.
Since Jobs died, Apple’s released dozens of new products and a new product line, grown several hundred percent in profits, and entered or expanded their presence in several auxiliary markets. Also, people buy billions of dollars worth of their phones every year, with customer loyalty numbers the rest of the industry can only dream about, and Apple makes virtually all of the industry’s profits. They’ve also (including Job’s tenure) literally invented five new markets, probably more than any company in history, and are clearly looking to do it again.
I don’t know if’s still true, but for a long time each new individual iPhone model outsold all of Samsung’s high-end Galaxy models in history…combined. Way more Android phones are sold (often at a loss), but Apple owns the premium phone market.
Are they worth $900 billion? Maybe, maybe not. All market cap values are basically fictions. But they certainly have all the things most investors are looking for in a company (including a very high return on investment, historically), and there’s a reason people have been speculating about them being the first company to break that $1 Trillion mark for a couple years now.
because their share price multiplied by the number of outstanding shares equals ~$900 billion.
seriously, that’s all that market cap is.
Last time I checked, Mercedes-Benz was still doing pretty well, despite there being cheaper cars available.
They’re a massive company that nevertheless manages to increase profits by ~5% a year. We’ll see if the trend can continue in coming years, but for now, market participants seems to be willing to pay the share price to hold the stock.
You’re forgetting the media market - they’re a gigantic player in the market for music/movies/other media. That’s a gigantic cash cow for them.
I’m curious what those would be. (Not smartphones, MP3 players, or tablet computers, for example.)
Right. Moreover, a whole lot more people can afford a premium phone than a premium car.
Of course Apple didn’t literally invent product lines. What they did do was come out with the first successful product in several product lines that actually worked and that people wanted to buy. So yeah, they didn’t invent the smart phone, but they built the first one that was worth buying.
Which is probably why Android has 80 percent of the smartphone market.
Think of it this way: If you’re right, you just found yourself a great shorting opportunity. That’s the beauty of the market. You can make money on the upside and the downside.
And they made the successful items by not coming first. Earlier smart phones, MP3 players, and tablet computers were bulkier, slower, and with less memory because that was what the technology supported at the time. Apple waited until years after other people had started making the devices and took advantage of the technological advances that weren’t available for the true innovators.
The desktop computer, MP3 players, smartphones, tablets, and watches. Bonus points for ultrabooks and all-in-ones. As someone else said, Apple didn’t build the very first of any of these, but did create the first commercially successful versions of all of them.
And that counts as “literally invent the market?” “Literally?”
Also, I’ll give you that the 2001 iPod was a bigger success than the Diamond Rio PMP300 that I had 3 years earlier, but calling Apple the one with the first successful smartphone, you really need to specify “that isn’t in Japan” and “that isn’t a Blackberry or to a lesser degree a Palm Treo.”
It is worth 900 billion because the market as a whole believes that Apple’s earnings potential justifies that price tag. Since it represents a PE of around 20, it theoretically believes that not only will Apple continue to make what it makes now, but it is likely to grow their earnings 20% per year (theoretically, since in certain sectors and at certain times the market develops amnesia on anything Peter Lynch ever wrote. )
You could argue that Apple will stop growing earnings at any such pace; after all, what market is large enough for them to enter and be able to move the needle on such a behemoth. You should short, in that case. Of course, people quite confidently made the same prediction on the same company many times in its history. They keep coming up with stuff, and those short the stock have felt real pain.
There are enough people willing to stump up £1000 for a phone and who are now convinced that that is a fairy mundane purchasing decision and should be repeated every year or two.
That’s pretty much it.
I believe that P/E ratio is less than that of the S&P 500 index as a whole. And remember that the company has something like $250 billion in cash. And last year, Warren Buffett (who normally avoids technology stocks, on the theory that he doesn’t understand it), bought a large amount of Apple stock. I think it was something like $18 billion worth.
This is the real point.
Apple is not a computer company. They’re an entertainment vendor who now controls content, distribution, and presentation in a locked ecosystem where they get all the margin at every level. That is huge and getting huger.
Various products existed first. The market for them did not. Apple came along, built the products to actually work better/at all, and now a huge market exists.
Seems like “literally invent the market” is exactly what I meant to say.
This is just going to start a holy war, though. Go ahead and define it differently however you want; Tim Cook won’t slow down from rolling in his money pit if you do.