Market observers have been a buzz following Apple Inc.’s valuation that passed the $700 billion mark, the first company in the U.S. to ever reach this figure.
Apple Inc. Set To Be Worth over $1 trillion in Just a Few Years
However, Carl Icahn an activist investor and one of the top ten shareholders at Apple thinks that Apple’s worth is well over the $1 trillion mark. However, other market analysts are determined that the iPhone maker’s stock could take a couple more years before being valued at $1 trillion.
Apple stock are the now worth more than Switzerland’s gross domestic product, according to Icahn. The investor also said Apple’s shares should be trading at at least $216 or what would be equivalent to $1.26 trillion in market capitalization.
If Icahn is right, the implication is that Apple’s stock has risen by 70%, in addition to the 65% increase in the tech company’s shares over the last 12 years, a surge that went beyond the standard S&P 500 15% return.
Mark Mulholland, a portfolio manager with a Mathew 25 fund that has showed impressive performance over the last five years said, “It would not be outlandish for Apple’s market cap to be at $1 trillion now.” However, Mulholland and other portfolio managers were quick to add that it would take a year or two for Apple’s worth to reach that level of market capitalization.
Changing fortunes for Apple stock
The technology industry is notorious of the changing fortunes. Only in the late 1990s Apple was at the brink of bankruptcy but today is the largest global technology company.
Tim Cook’s ability to lead the tech firm in keeping up with launching game-changing products has been helpful in keeping Apple competitive in the global markets.
Apple recorded impressive quarterly earnings at the start of the year due to historically high iPhone sales. The earnings went above Wall Street forecast, causing market analysts to increase the firm’s stock price targets over the next 12 months. Analysts have now settled or $134 as the median stock price although this is way below Icahn’s $216 target price for Apple stock.
Addressing his Twitter followers, Icahn said that Apple’s worth is largely undervalued.
Thursday 12 2015 was a significant day in Apple’s and Wall Street history. Apple’s stock closed at $126.46, bringing the company’s market cap to a record shattering $736.6 billion.
Gradual changes for Apple stock
Tim Ghriskey, chief investment officer of Solaris Group was quick to assert that it would still take a couple of years for Apple stock to record a capitalization of $1 trillion. He said, “Apple’s earnings and share prices will likely only increase modestly faster than other s&p 500 companies in the next four years.
Ghriskey believes that new product categories, in addition to the iPhone are necessary to keep Apple’s earnings more impressive than other tech competing tech companies are.
It is expected that Apple Pay and Apple Watch which is set to launched in April may have a positive impact on the stock. However, analysts are skeptical whether these new products may have a significant contribution to the company’s earnings.
While Apple is certainly the most valuable company in the world now, it is important that investors refrain from becoming too excited about the predicted $1 trillion market capitalization mark.
Apple’s success is largely dependent on iPhone. The hardware industry is intensely competitive and it can be difficult for any one brand to dominate the industry forever.
Other companies that investors should also have their eyes on are Google and Microsoft, which might actually hit the $1 trillion mark before Apple—these tech giants are more focused on services and software which are less cutthroat.
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