Apple Surges to $2 Trillion Market Value

20:25, Wednesday, 19 August, 2020
Apple Surges to $2 Trillion Market Value

Apple just crossed the $2 trillion market capitalization mark, becoming only the second company ever to do so.

From a garage in Los Altos, California to the most profitable company in the world with its devices, services and ethos interwoven into much of modern daily life, the high-flying valuation sets it apart from its nearest tech competitors. Amazon and Microsoft boast market capitalizations of about $1.5 trillion each. Google’s is just north of $1 trillion.
     In terms of company fundamentals, there is little substantive difference between whether a company is a few dollars over or under an arbitrary number. But cresting the marker can send out a powerful psychological signal.

“It’s a poll position in investors’ minds. When you cross the milestone first, it’s a signal of leadership,” said Gene Munster, Loup Ventures founder and former top tech stock analyst.

It’s a historic datapoint further cementing the the company that ushered in the personal computer revolution and illustrating its continued strength under Tim Cook, who took the reins after the passing of hands-on company cofounder Steve Jobs in 2011.

“Apple’s $2 trillion valuation represents about 10 percent of GDP for the U.S. and about 7 percent of the S&P 500,” said David Kass, professor of finance at the University of Maryland's Robert H. Smith School of Business. “Its iPhone is ubiquitous. It has transformed the way we live. Its ecosystem is self-sustaining.”

But a more significant moment may have been when the company topped $1 trillion for the first time, in August 2018. After breaking $1 trillion, it becomes easier for investors to imagine it might go to $2 trillion or $2.5 trillion, Munster said.

The tech and services company has positioned itself to take some advantage of its new stature. In early August, the company announced a four-for-one stock split, the company’s fifth stock split since going public in 1980. Individual shares are trading in the mid-$400’s, so for instance a unit worth $440 would be split into four shares of $110. That makes them more affordable for smaller investors to pick up.

Apple wants “to make our stock more accessible to a broader base of investors,” said Luca Maestri, the company’s chief financial officer, during a recent earnings call.

Historically, stock splits tend to increase demand, increasing value for existing shareholders, which include company employees.

The tech company isn't the first to hit the $2 trillion mark. Saudi Arabia's state-owned Saudi Aramco, the world’s largest producer of oil, did so during its December 2019 stock debut. But the company was hammered during this year’s global economic slowdown and a plunge in oil prices, and its valuation has since tumbled to $121 billion.

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