There are dozens of headlines recently about the fact that Apple could be the first company to have a $3 trillion market cap. These miss the point. What is more telling is how Apple’s market cap relates to those other public companies with market caps over $1 trillion. (These companies have the best reputations.)
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Apple’s current market cap is $2.98 trillion. The third largest company based on a market cap is Alphabet, owner of Google and YouTube, at $1.52 trillion. In fourth place, Amazon has a market cap of $1.31 trillion.
Why is Apple’s market cap so much higher? It has better prospects.
Apple remains largely a hardware company that commands ridiculous demand, particularly for its iPhone. Every year, Apple releases a new version of the iPhone. Every year, it sells tens of millions of these. Miraculously, this trend has not shown any fatigue, nor is it expected to. Apple boosts its Mac and smartwatch hardware sales well. It also has a highly profitable software and services business. However, none of these drive its strength on either a brand or revenue basis.
Alphabet has a challenge that will remain while the economy is weak. It is an advertising company. Ad rates weaken as consumer spending gets threatened. That is the case today and could be for another year. Beyond Google and YouTube, Alphabet has no other large source of revenue.
Amazon is currently a wreck. Its huge e-commerce business barely makes money. It has overbuilt its infrastructure and product lines and started cutting those back. However, the efforts are painful, financially and in terms of personnel. Amazon’s successful unit is its cloud-driven Amazon Web Services. But AWS is not large enough to entirely make up for the trouble in Amazon’s original business.
Apple’s market cap is much higher than other $1 trillion companies because it has a better business model.
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