Apple becomes first US company worth $2tn as shares surge 50%

Tech giant now worth $300 billion more than the next-largest US company, Amazon

Apple has hit a $2 trillion (€1.68 trillion) market capitalisation, barely 24 months after it became the world's first trillion-dollar company.

The Silicon Valley pioneer is the first in the US to achieve such a valuation on the public markets and only the second in the world to do so. The shares added 1.3 per cent to trade at $468.40 by mid-morning in New York.

State-backed oil company Saudi Aramco briefly hit the milestone during intraday trading last December, on the day after its initial public offering, but its shares subsequently closed below the $2 trillion dollar mark. Aramco's stock market fortunes have waned since its IPO to trade at a market valuation of about $1.8 trillion, and Apple surpassed it last month.

The iPhone maker's shares have surged more than 50 per cent this year despite various business challenges, including shutting retail stores due to coronavirus, mounting political pressure over its reliance on China during the US government's campaign against Chinese apps TikTok and WeChat, and further prominent allegations of anti-competitive behaviour.


On Wednesday, shares crossed the threshold of $467.77, making Apple the first $2 trillion tech giant and creating a gap of more than $300 billion between it and the next-largest US company, Amazon.

While Apple's trillion-dollar milestone was first surpassed in August 2018, Neil Campling, an analyst at Mirabaud Securities, has noted that its share price has doubled since its low point in March this year, when panic about the coronavirus pandemic swept Wall Street.

“Adding a trillion in four or five months –- that’s really quite unbelievable,” Mr Campling said. “We have in a very quick period of time for Apple gone from a discount valuation to the market to a premium valuation.”

Blockbuster earnings

That the iPhone maker has been able to record blockbuster earnings during a global pandemic which has constrained its supply chain and limited its access to customers has taken aback investors and industry analysts alike. When it reported that all five of its product categories increased revenue in the June quarter, Goldman Sachs analysts told clients: “It turns out that we and consensus weren’t even in the ballpark in terms of what was possible.”

Apple, too, has been surprised. In February, when Covid-19 was fairly contained to China, it issued a revenue warning and withdrew its guidance. Despite the virus then spreading to the rest of the world and the global economy falling into recession, overall sales soared by 11 per cent in the June quarter.

Apple’s $1 trillion rally in just 24 months largely reflects its success in moving beyond the smartphone. Two years ago, 55 per cent of its June quarter revenue was derived from the iPhone. That share has since dwindled to 44 per cent, even as revenues have increased 12 per cent.

In so-called wearables, Apple accounts for more than 40 per cent of the global market for smartwatches and "true wireless" headphones, according to Canalys, a tech market analysis group. Its push into a proliferation of services – from warranties to music, movies and a credit card – now offers recurring revenue from 550 million paying users, giving Apple smoother earnings and less dependence on the iPhone upgrade cycle.

The $2 trillion milestone will serve as another vindication for the strategy and deft political navigation of Tim Cook, who has always been dogged by questions about whether he could adequately replace the late visionary Steve Jobs. Today, Apple is performing so well – even as the economy tanks – that Mr Cook, who earned $125 million last year, can at times sound embarrassed by its riches.

“We do not have a zero-sum approach to prosperity, and especially in times like this, we’re focused on growing the pie, making sure our success isn’t just our success, and that everything we make, build or do is geared toward creating opportunities for others,” he told investors on July 30th.

Double digits

The services arm that Mr Cook has championed earned $13.2 billion last quarter alone, and numerous investors expect it to continue growing in double digits.

Nick Grous, analyst at Ark Invest, said he is bullish on Apple because of its potential to leverage its large user base and become a fintech giant. In some ways, he said, Apple already is a giant, as it skims 15 cents from every $100 spent using its contactless payment system Apple Pay. That's a small number, but one that gets multiplied by more than 400 million users.

“Right now it’s not a huge revenue driver, but it’s about getting the trust of consumers,” Mr Grous said. “In the future it’s possible you’ll see an Apple loan product” given the data it has on consumer spending.

Stellar as Apple’s earnings are, a number of analysts are concerned that valuation metrics are being stretched. Apple’s price-to-earnings ratio is almost 35 times, its highest since late 2007 as the original iPhone unleashed unprecedented growth.

Apple would like to see its stock price go higher. It recently announced a four-for-one stock split that will, when it goes into effect on August 31st, make its shares more accessible to the general public.

"We think we've got the best pipeline of products and services that we've ever had," Apple finance chief Luca Maestri told the Financial Times on July 30th. "And if we are able to accomplish that, then I think the stock price follows."

– Copyright The Financial Times Limited 2020