Apple becomes first company to achieve $ 3 trillion market value

Combine Walmart, Disney, Netflix, Nike, Exxon Mobil, Coca-Cola, Comcast, Morgan Stanley, McDonald’s, AT&T, Goldman Sachs, Boeing, IBM and Ford.

Apple is always worth more.

Apple, the computer company that started out of a California garage in 1976, is now worth $ 3 trillion. It became the first publicly traded company to hit that figure on Monday, when its shares briefly eclipsed $ 182.86 a share before closing at $ 182.01.

Apple’s value is even more remarkable considering the speed of its recent rise. In August 2018, Apple became the first US company to be worth $ 1,000 billion, a feat that spanned 42 years. It surpassed $ 2 trillion two years later. His next trillion took only 16 months and 15 days.

Such a valuation would have been unfathomable a few years ago. Now this looks like another milestone for a corporate titan that continues to grow and seems to have few big obstacles in its way. Another tech giant, Microsoft, could follow Apple to the $ 3 trillion club earlier this year.

“When we started we thought it would be a successful business that would last forever. But you don’t really envision that, ”said Steve Wozniak, an engineer who founded Apple with Steve Jobs in 1976.“ Back then, the amount of memory that a song could hold was $ 1 million.

 Apple’s market valuation has risen rapidly in recent years, bolstered by the surge in sales of iPhones and other devices during the pandemic.

By just about any measure, an estimate of $ 3 trillion is striking. It is worth more than the value of all the cryptocurrencies in the world. It is roughly equal to the gross domestic product of Great Britain or India. And that equates to about six JPMorgan Chases, America’s largest bank, or 30 General Electrics.

Apple now accounts for nearly 7% of the total value of the S&P 500, breaking IBM’s record of 6.4% in 1984, according to Howard Silverblatt, an analyst who tracks valuations of the S&P Dow Jones indices. Apple alone accounts for about 3.3% of the value of all the world’s stock markets, he said.

Behind Apple’s rise is its grip on consumers, an economy that has particularly favored its business and its stock, and its judicious use of a huge pile of money.

When Apple unveiled the iPhone in January 2007, the company was worth $ 73.4 billion. Fifteen years later, the iPhone, already one of the best-selling products in history, continues to show impressive growth. In the year ending September, iPhone sales totaled $ 192 billion, up almost 40% from the previous year.

The pandemic also skyrocketed sales of other Apple devices – as people used them more for working, studying and socializing – and sent investors fleeing to the safety of Apple stocks in an increasingly global economy. more uncertain.

Apple’s huge sales and large profit margins have provided it with a stock of money large enough to buy a company like UPS, Starbucks, or Morgan Stanley. At the end of September, Apple declared $ 190 billion in cash and investments.

“They created the biggest cash machine in history,” said Aswath Damodaran, a finance professor at New York University who studied Apple.

Yet instead of making a major acquisition, or even trying something ambitious and expensive like building multiple factories in the United States, Apple decided to give back much of its money to its investors by buying its own. actions.

Over the past decade, Apple has bought $ 488 billion worth of its own stock, by far the most companies, according to an analysis by Silverblatt. Much of that spending came after Apple used a 2017 tax law to transfer most of the $ 252 billion it held overseas to the United States. Apple is now responsible for 14 of the 15 biggest share buybacks in a single financial quarter, Silverblatt said. “They are the poster child,” he said.

An Apple spokesperson pointed out that Apple has spent more than $ 82 billion on research and development over the past five years, steadily increasing its investments each year, and that it employs around 154,000 people, or 38 000 more than five years ago.

Apple is also the largest taxpayer in the United States. In April, the company said it had paid $ 45 billion in taxes over the previous five years.

Economists are divided on buybacks. Some economists say companies with excess cash should return the money to their shareholders – that it’s much better for the economy than sitting on billions of dollars in cash, they say.

“The whole idea that the buyouts are sort of going into a black hole is mystifying,” Damodaran said. “It’s money that goes to investors.”

Other economists say buyouts are largely designed to increase the valuation of a business and that the money should instead be used to invest in the business, raise wages or even lower prices.

Apple, for example, has spent billions of dollars buying its own stocks while using low-wage workers to assemble its products, working hard to avoid taxes and tariffs, and continually raising the prices of its devices.

“Apple could have used that money to do all kinds of things. Instead, they use it to raise the price of their shares, ”said William Lazonick, professor emeritus of economics at the University of Massachusetts, who has been a leading critic of share buybacks since the 1970s. 1980s.

Lazonick said the buybacks boosted stock prices by encouraging investors to buy and then creating momentum in the stock market as other investors look to cash in on the increase.

Share buybacks reduce the total number of shares available for purchase. This makes every remaining stock more valuable and improves the underlying fundamentals of the business in the equations that large investors and automated trading systems use to pick stocks. As a result, the share price climbs higher.

For Lazonick, a valuation of $ 3 trillion is the result of a mixture of factors. “It is impossible to know to what extent this is speculation, manipulation and innovation,” he said.


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