Against common wisdom, against difficult odds, Apple rose to the very top of the tech industry. Now that they’ve become the first company to be valued at $2T, they’re certain to fall. Or maybe not.
Perhaps there is room left in Apple’s upward trajectory.
At last week’s close, AAPL was trading for $497/share, giving the company a market capitalization of $2.1T…that’s T as in trillion. Clearly, the skeptics say, this is unsustainable, no tree grows to the sky, the larger a company becomes the more difficult it is to sustain growth. That’s what many, yours truly included, thought when Apple became the first company to cross the $1T market cap line in August 2018. And yet the company has achieved the inconceivable and doubled its value in exactly 24 months.
We’ll recall that the antitrust action against Microsoft did little to stop the company’s progress. As Bill Gates recently said, referring to Apple and other companies of its size:
“If you are as successful as I am, or any of those people are, you deserve rude, unfair, tough questions. The government deserves to have shots at you. That type of grilling comes with the super successful territory, it’s fine.”
Gates is right, of course. And Apple seems more than prepared.
After four stock splits (there’ll be another this Monday), a single share of AAPL at the 1980 IPO price ($22) would be worth $27,859 today. That’s a 126,631% gain. Impressive…but Microsoft did even better with its own IPO, six years after Apple’s. By December 2019, MSFT had yielded a 211,000% gain.
Having reached the $2T pinnacle, Apple doesn’t appear to be foundering. All companies have their tailwinds, the momentum that keeps it going. For Apple, it’s all about constantly creating and improving the product line. Here’s what I think is likely to ship in the next four to six months.
We’ll start with Apple’s largest revenue producer (44%), the iPhone. With a fresh release of iOS 14, the fastest silicon, and perhaps a small Pencil for some models, the iPhone 12 is likely to grow the Apple revenue tree.
Next comes the newfangled Mac running on Apple Silicon. The Mac recently accounted for 12% of revenue. The new machines, laptops for the time being, should push that number a bit higher, mainly because they’ll be faster and nicer…, but also because they’ll (possibly, according to rumor) sport new features such as a touch screen and better cameras.
Apple’s Wearables and Home accessories provide about 11% of revenue. An obvious improvement would be a new Watch with stronger new features than last year’s…
…we may Finally™ see the mysterious AirTags, which by themselves won’t move the revenue needle, but they’ll help sell iPhones.
…a new Apple TV and improved game controllers, we probably won’t get a new HomePod version
…the Beats brand is being “deprecated”, made to disappear, meaning we’re likely to see new Apple-branded headphones and, perhaps, new AirPods variations.
I won’t comment on the Services category, which now represents 22% or more of total revenue. Blind faith tells me it will continue to provide revenue growth.
Ditto the iPad, 11% of revenue. We’ll see if and when new models fit the busy lineup we’re traversing.