Apple’s Market Cap Hits $1.66 Trillion

By Douglas A. McIntyre Published Jul 13, 7:31AM EDT

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Apple’s Market Cap Hits $1.66 Trillion — © Eric Thayer / Getty Images News via Getty Images

Apple Inc.’s (NASDAQ: AAPL | AAPL Price Prediction) market capitalization has been the highest among all American companies off and on, trading places with Microsoft Corp. (NASDAQ: MSFT). Now Apple has pushed into the top spot with a market cap of $1.66 trillion, a figure that was unimaginable a year ago. It hit the figure with an 89% increase in share price over the past year, compared to Microsoft’s 55% increase. The threat of COVID-19 to the economy has not phased the optimism of the market.

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How Can Apple’s Value Be So High?

On paper, there are reasons Apple should not have done so well. Its revenue for the quarter that ended March 28 was $58.3 billion, up only 1% year over year. Earnings were at $2.55 per share, up a modest 4%. Apple said it would be hard to forecast future sales.

The pandemic has made that difficult. However, the board was confident enough to issue a cash dividend of $0.82 a share when many other companies have reduced or eliminated theirs. Apple also said it would increase its share buyback account by $50 billion. It has the cash. At the end of the quarter, it had $93 billion in cash and marketable securities. Apple generated operating cash flow of $13.3 billion in the quarter.

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What Apple Sells Is the Key to the Rise in Market Cap

The engine of Apple’s success for nearly a decade has been the iPhone, among the most successful smartphones in the world. Only sales of Samsung’s smartphones have challenged it.

However, the iPhone is no longer critical to Apple’s growth. Revenue from iPhone sales declined in the most recent quarter to $29 billion from $31 billion the year before. Mac revenue dipped a very small amount to $5.3 billion. iPad sales fell from $4.9 billion to $4.3 billion.

Apple’s one piece of good news is that revenue from its services division rose from $11.5 billion to $13.3 billion. That was the figure investors are in love with.

Services and 5G

Apple has hundreds of millions of devices in the global market place. Management believes it can sell people credit cards, movies, music and cloud storage. The Apple brand power may be enough to get people to stay inside Apple’s “ecosystem” and not buy these services from another company. If so, Apple’s services business could generate $80 billion a year, and it has margins much higher than Apple’s hardware.

The other driver of optimism about Apple’s future is the new 5G ultrafast broadband service, which has started to be installed around the world. It has begun to replace 4G service, and many people will need a new smartphone to access it. Apple can sell these people a new generation of smartphones as people worldwide upgrade to take advantage of this significantly faster speed.

Apple’s Future Market Value

Apple’s growth may have slowed temporarily. However, it has new products and services poised to push the growth rate, and its market cap, much higher.
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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.