Combine Walmart, Disney, Netflix, Nike, Exxon Mobil, Coca-Cola, Comcast, Intel, McDonald’s, AT&T, Goldman Sachs, Boeing, IBM and Ford.
Apple is still worth more.
Apple, the computer company founded in a California garage in 1976, is now worth $ 3 trillion. It was the first publicly traded company to hit that number on Monday.
Apple’s worth is even more remarkable considering how quick its recent rise has been. In August 2018, Apple the first American company ever worth a trillion dollars, an accomplishment that took 42 years. It up over $ 2 trillion two years later. The next trillion only lasted 16 months.
Such an assessment would have been unthinkable a few years ago. Now it seems like another milestone for a corporate titan that is still growing and seems to have some high hurdles on its way. Another tech giant, Microsoft, could follow Apple into the $ 3 trillion club early next year.
“When we started we thought it would be a successful company that would last forever. But you can’t really imagine it, ”said Steve Wozniak, the engineer who founded Apple in 1976 with Steve Jobs. “Back then, the storage capacity for a song cost 1 million US dollars.”
A valuation of $ 3 trillion is eye-catching by pretty much any yardstick. It is worth more than the value of any cryptocurrency in the world. It is roughly equivalent to the gross domestic product of Great Britain or India. And it’s the equivalent of about six JPMorgan Chases, the largest American bank, or 30 General Electrics.
Apple now accounts for nearly 7 percent of the total value of the S&P 500, breaking IBM’s record of 6.4 percent in 1984, according to Howard Silverblatt, an analyst who tracks the S&P Dow Jones indexes’ valuations. Apple alone accounts for about 3.3 percent of the value of all global stock markets, he said.
Behind Apple’s rise are its firm grip on consumers, an economy that has favored its business and stocks, and its shrewd use of huge piles of cash.
When Apple first introduced 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, has seen impressive growth. For the year ended September, iPhone sales were $ 192 billion, nearly 40 percent more than last year.
The pandemic also skyrocketed sales of other Apple devices as people used them more for work, study, and socializing, and investors fled to the safety of Apple stock in an increasingly uncertain global economy.
Apple’s immense sales and high profit margins have given it a stash of cash large enough to buy directly from a company like UPS, Starbucks or Morgan Stanley. At the end of September, Apple reported $ 190 billion in cash and investments.
“They created the largest ATM in history,” said Aswath Damodaran, a New York University finance professor who studied at Apple.
But instead of making a big acquisition or even attempting something ambitious and expensive like building multiple factories in the US, Apple has decided to give most of its money back to its investors by buying its own stocks.
According to an analysis by Mr. Silverblatt, Apple has bought $ 488 billion of its own shares in the past decade, by far the largest number of companies. Much of that expense came after Apple used a 2017 tax law most move It had held $ 252 billion abroad back to the US Apple is now responsible for 14 of the 15 largest share buybacks in a single financial quarter, said Silverblatt. “You are the figurehead,” he said.
An Apple spokesperson pointed out that Apple has spent more than $ 82 billion on research and development over the past five years, has steadily increased its investments every year, and has around 154,000 employees, 38,000 more than before five years.
Economists are divided over buybacks. Some economists say companies with excess cash should return the money to their shareholders. They say it is far better for the economy than sitting on billions of dollars in cash.
“The whole idea that buybacks somehow result in a black hole is mysterious,” said Damodaran. “This is money that goes to investors.”
Other economists say buybacks are primarily used to increase a company’s valuation and 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 stock while using low-wage workers to assemble its products, working hard to avoid taxes and tariffs, and continuously raising the prices of its devices.
“Apple could have gone and used that money for all sorts of things. Instead, they’re using it to boost their stock price, ”said William Lazonick, a professor emeritus of economics at the University of Massachusetts who has been a leading critic of buybacks since the 1980s.
Mr Lazonick said buybacks add stock prices by encouraging investors to buy and then kicking the stock market as other investors try to take advantage of the surge.
Share buybacks reduce the total number of shares available for purchase. That makes every remaining stock more valuable and improves the underlying company fundamentals in equations that large investors and automated trading systems use to select stocks. As a result, the share price will rise higher.
For Mr. Lazonick, a $ 3 trillion valuation is the result of a mixture of factors. “It’s impossible to know how much of this is speculation, how much manipulation, and how much innovation,” he said.
Ladles Browning Reporting contributed.