Apple at a Trillion: Is it a possibility?

Some analysts predict that Apple will become the first company valued at $1 trillion dollar in a few years. With stock prices hovering at $600 per share, what does a market capitalization prediction like this mean for Apple and the market itself? Is it even possible? Zintro experts weigh in.

Clay Andres, a publishing expert, thinks that it’s surprisingly easy to justify $1 trillion for Apple stock. “Has there ever been a company so successful in so many ways? Even bad news doesn’t seem to tarnish Apple’s golden image. But how long can a company maintain such exponential growth?” says Andres. “Anyone can look at the numbers and see that Apple’s stock price and total valuation are in a range well outside several standard deviations of historic norms. This makes any sort of statistically-justified prediction ludicrous. Much of Apple’s growth has come at the expense of its competitors; they have shrunken in value by about the same amount that Apple has gained.”

And Andres wonders if Apple’s future lunch is just a larger share of a finite pie. “How many companies will be driven out of business before Apple can reach the trillion dollar plateau? On the other hand, it doesn’t take an economist to know that we live in an ever-expanding world pie, and the most rapidly expanding pie slice is China,” he says. “We can hardly begin to conceive of how large this market might become. But judging from the wild popularity of Apple’s products in China, the trillion dollar goal doesn’t seem at all unreasonable. India is growing faster than China and is expected to become the largest country in the world before this decade is out. So India is a factor as well.”

With so much talent and tech innovation supporting Apple’s products, Apple can concentrate on pushing the entire tech-ecosystem ahead. “Instead of reacting to competitor’s threats by blanketing the market with endless product variations, Apple needs to remain focused and that is the challenge. The distractions of being pre-eminent are huge,” he says.

“Apple’s stock price over $1,000? The S&P would likely be much higher (near 2,000) and the economy would be picking up steam. If Apple breaks $1,000 whilst the economy and stock market tread water or decline then it would be a once in a generation short,” says John Griffin, an equity analyst and professor. “Think about it: The market cap of one company being 1/15th the size of the entire US economy? What Apple has is intellectual capital and a nice sized cash hoard.”

Vidia Ramdeen, an emerging hedge fund manager, thinks that Priceline will first earn the trillion dollar market capitalization. “Apple is still a high beta tech stock and although stock price movement of Apple had reflected inversely to VIX (CBOE volatility index), the company profitability is a function of the broader economy and notably the U.S. where profit per unit sold is highest,” he says.

Ramdeen says whether it’s Priceline or Apple, the market implication is of a statistical outlier, indicating profits indicative of monopolization. “Arguably, Microsoft stock could have appreciated similarly to Apple was it not for federal authorities ruling Windows as anti-competitive or essentially a monopoly,” he says. “Regardless, the implication for Apple and the market is that consumerism will push market caps of hot tech or internet products. Apple, Google, Priceline, and possibly Facebook will have elevated stock prices that reflect a dominant product and market strategy. Consumers currently face inelastic demand curves for these products and/or services.”

Shehara deSilva, a communications and brand expert, thinks that Apple is certainly the most probable candidate to become the first company in the world to have a trillion dollar market cap. “Apple’s brand value as per Interbrand is now $33 billion (latest 2011 valuation) and is ranked at number eight moving up from last year’s 17,” she notes. “Typically there is little movement on these rankings. That Apple with its iPad launch in 2010 ( amongst other strategies) did this is incredible. Its foray into China, however, is the big risk. Can Apple manage to maintain its design and quality premium going in and operating in the world’s most commoditized market?”

By Maureen Aylward

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