Daily Brief - The first $3 Trillion company: Apple (Jan 4, 2022)

It’s been a good few years for the iPhone maker. Under Tim Cook’s stewardship, the company’s value tripled since 2018 as its sales continued to soar and it spent hundreds of billions of dollars on its own stock.

As the NYT points out, if you combine Walmart, Disney, Netflix, Nike, Exxon Mobil, Coca-Cola, Comcast, Morgan Stanley, McDonald’s, AT&T, Goldman Sachs, Boeing, IBM and Ford - Apple is still bigger.

The brief history

In August 2018, Apple became the first American company ever to be worth $1 trillion. It took 42 years to reach that milestone. It took only two more years to surge past $2 trillion. The last trillion took just a year and four months.

As they say, that first trillion is the hardest …

S&P behemoth

Apple’s weight in the S&P 500 now accounts for 7% of the total, breaking the 1984 record IBM held when it accounted for 6.4% of the index. It’s not by accident: in its 2021 financial year, iPhone sales were $192 billion. That was an astonishing 40 percent (or a shade less) rise from the year prior!

Setting up for a December surprise?

As Barron’s explains in its “where next” article, it’s easy to see why Apple has rallied recently.

The key factor is strong demand for its latest iPhone, not fully appreciated by the Wall Street crowd. Analysts had seen the iPhone 13 lineup as an interim step (unlike the iPhone 12, the first to include 5G connectivity). But like with the iPhone 11, investors have underestimated demand for it. In particular, there has been historically high demand for the new phones in China.

Apple has also become the blue chip stock tech investors buy when markets are in turmoil. Unlike demand for streaming or video calling, fluctuating wildly as the world veers from one pandemic scare to another, appetite for Macs, iPads and iPhones just keeps growing.

And then there is the wild card: Apple’s prodigious innovation muscle. According to some Wall Street analysts, the market isn’t pricing in any premium for potential new product launches like the Apple car, or foldable iPhone. (Excellent source of rumors here.)

Where to next?

Four trillion, of course. But in the shorter term, look out for the earnings announcement around January 26.