Apple, Inc. valuation passes $500 billion, half the market cap imagined last year

Posted:
in AAPL Investors edited January 2014
Despite reaching a new peak share price for 2013 that pushed Apple's market capitalization above $500 billion, the company's valuation remains where it was in the spring of 2012, at a time when analysts were predicting Apple's market cap would soon double.

AAPL 2008-2013


In April 2012, analysts Gene Munster of Piper Jaffray and Brian White of Topkea Capital Markets had both set price targets envisioning Apple reaching $1000 per share within the year, a price that would have pushed the company very close to a one trillion dollar valuation.

Apple surpassed analysts' estimates for iPhone sales in that spring quarter, beginning an upward stock trajectory for 2012 that peaked in September 2012 at around $700.

2012 AAPL peak not irrational

In August, White described Apple's rise as particularly worthy of note because other companies that had reached such a high valuation, including Microsoft, Cisco and Intel, had only done so after achieving dominance in their respective markets.

Unlike Microsoft's 90 percent market share among PCs at its market cap peak, or the 80 percent share Intel held in PC CPUs, or the 70 percent share of networking products Cisco held, Apple's share of PCs remained at just 4.7 percent, and the company's share of smartphones was figured to be at 64.4 percent, according to numbers from IDC. That indicated plenty of room for future growth.

White also contrasted other companies that had reached $500 billion valuations, including General Electric, Exxon-Mobile, Cisco, Intel and Microsoft, as having fat price-to-earning ratios of over 60 times, compared to Apple's ratio of just 10.7 times its estimated 2013 earnings.

However, just one month later Apple shares began crashing to earth, dropping over 20 percent to lose $142 per share by the end of the year. Despite continued record sales and the wildly successful launch of both iPhone 5 and the new iPad mini, Apple's shares remained weak as pundits drew attention to new competition from Android led by Samsung.

Analysts and investors quickly changed direction in their outlook for Apple, guiding the company's valuation sharply downward throughout 2013, reaching lows in April and June below $400 that paved the way for a huge buyback program.

The AAPL iPhone crash of 2008

Apple's stock whiplash of 2013 was not nearly as dramatic as its bipolar meltdown in 2008. At the beginning of that year, Steve Jobs admonished employees to "hang in there," writing, "our stock is being buffeted around by factors a lot larger than ourselves."

Jobs added, "I continue to believe that our fundamentals - our remarkable people, our clear and focused strategy, our new product pipeline, our 200+ retail stores, our $18 billion of cash in the bank with no debt, etc., will serve us well in the coming months and years."

Over the winter of 2007, the first holiday season of iPhone, the company's shares had plummeted from highs near $200 to a low of $119 within two months. Shares then recovered by the end of May only to crash back to $82 by November. The insanity of Apple's 2008 valuation roller coaster is particularly noteworthy in hindsight, given the uniqueness of the iPhone as an unquestionably innovative and profitable product with tremendous growth potential.

AAPL 2008


Throughout 2013, it was new concerns about innovation, growth and sustained profitability that dogged the company's valuation. Apple's shares haven't dropped as dramatically this year as in 2008, but wild shifts have involved far larger swings in dollar scale.

Between its January high point of $549 to the recent close at $556, Apple shares have lost and regained over $150 billion in market valuation, more than Apple's entire peak valuation in 2008 and nearly twice as large as investors had priced the company as being worth by the end of 2008.

AAPL vs GOOG

When Apple reached $700 last year, it coincided with Google's stock reaching the same share price (although Google has far fewer shares outstanding, resulting in a lower total market capitalization). Since then, while Apple plunged below $400 and has since recovered to $550, Google's shares have reached above $1060.

Apple's market cap is still much higher than Google's (just above $500 billion compared to $354 billion). However, if Apple had tracked a similar share price trajectory as Google over the past year, its market cap would now be over $950 billion, right where analysts had been predicting Apple would go.

Apple's poor performance relative to Google over the past year is only observable when constraining the view to 2013, a year that so far has only registered a flat chart for the world's most valuable and by far the most profitable computer and phone vendor. Backed out to five years, Apple has performed nearly twice as well as Google.

AAPL GOOG


After punishing Apple with wild swings and a tremendous net loss of valuation (twice!) in 2008, the market more than doubled the company's valuation in 2009, setting a upward trend that, ignoring the surge of 2012 and its slump in 2013, points straight forward toward a short term destination of $600.

The other difference between Apple and Google is that Apple has bought back billions of dollars worth of its outstanding shares over the past summer, dropping the company's share count from a high of 940 million shares last September to just under 900 million shares today.

Rather than buying back shares, Google has been issuing new ones, growing from around 328 million shares last September to today's peak of over 334 million. At a share price of $1060, Google's extra 5.5 million shares have invented over $5.8 billion out of thin air, at the expense of the dilution of value of its shareholders.

And of course, Apple has also paid out over $10 per share in dividends over the past year, while Google has no dividend.

Overall, this seems to indicate that the confidence analysts placed in Apple's fundamentals at the beginning of 2012 was correct, and its impact on the company's actual share price was simply delayed by a misinformed, year long ripple of irrational trading behavior, as was clearly the case in 2008.
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Comments

  • Reply 1 of 72
    asciiascii Posts: 5,936member
    There was an article the other day about the dodgy market share figures issued by some firms. I wonder if one graphed these market share estimates and overlaid it on the share price what it would look like.
  • Reply 2 of 72
    rob53rob53 Posts: 3,199member
    Irrational is being polite for the insanity going on in the stock market.
  • Reply 3 of 72
    2012 was a sick joke on Apple shareholders. So many analysts suckering mom and pop investors and Apple shareholders into believing Apple was going to be the first trillion dollar market cap company. Yeah, how Apple was going to shoot past $1000 a share. Andy Zaky was a major cheerleader in turning foolish and naive investors into paupers. There was always this talk about a cosmic Apple slingshot being pulled back which would propel Apple's share price into the stars. It only propelled Apple stock into a black hole. The mighty pull-back of $700 to $600 to $500 and eventually to $400. Andy Zaky and the rest of the liars who shorted Apple to death while telling them Apple was so undervalued that nothing could possibly go wrong. Wrong! Tim Cook and Apple handed the smartphone industry and most of its market share over the Samsung and that was the end of Apple shareholder's dreams of riches.

    Apple stock sunk into the Grand Canyon of losses and stayed there for most of 2013 while the rest of the stock market just took off into the stratosphere and many of the profitable tech companies saw added share gains of 20% to 30%. Microsoft got gains of 40% for the year. Heck, even H-P, that financially sick company doubled in share price. I hope a good lesson was learned about depending on Apple to get rich. Don't trust a a company that sits on a mountain of reserve cash while shareholders get reamed. Samsung became the top dog in mobile. Google laughed all the way to the bank and became Wall Street's tech darling of the year. Amazon made about a $1 worth of profit and gained about $160 a share in 2013. Jeff Bezos scoffed at Apple's inefficient business model.

    Yeah, Apple was a sure thing, they all said. Fat profits and a mountain of cash. The 800 lb. gorilla. Market share turned out to be much more important to Wall Street than profits and it continues to be so. So, Apple is finally in the black. Big deal. The so-called money-making machine finally broke even for 2013. Let's all tip our caps to Tim Cook for a job well done and pray 2013 doesn't end up as a repeat of 2012.
  • Reply 4 of 72
    Dan_DilgerDan_Dilger Posts: 1,583member
    Quote:

    Originally Posted by Constable Odo View Post



    Andy Zaky and the rest of the liars who shorted Apple to death while telling them Apple was so undervalued that nothing could possibly go wrong. Wrong! Tim Cook and Apple handed the smartphone industry and most of its market share over the Samsung and that was the end of Apple shareholder's dreams of riches.

     

    Writing the latter makes you simply sound uninformed, but the former smacks of libel. Do you have some evidence that Zaky intentionally mislead anyone, or that he bet against anyone he advised by short selling? If not, you should not spout off such claims.

  • Reply 5 of 72

    Market capitalization in and of itself is quite a useless metric. Apple's buyback program actually lowers their Market capitalization as it retires shares which are used to calculate the value. This means that the 1 Trillion prediction was kind of stupid as their success yields a counter result. I think they will hit it someday and likely be the first to do so. I just don't think it really matters much.

  • Reply 6 of 72
    jonljonl Posts: 210member
    Quote:

    Originally Posted by Corrections View Post

     
    Quote:
    Originally Posted by Constable Odo View Post



    Andy Zaky and the rest of the liars who shorted Apple to death while telling them Apple was so undervalued that nothing could possibly go wrong. Wrong! Tim Cook and Apple handed the smartphone industry and most of its market share over the Samsung and that was the end of Apple shareholder's dreams of riches.

     

    Writing the latter makes you simply sound uninformed, but the former smacks of libel. Do you have some evidence that Zaky intentionally mislead anyone, or that he bet against anyone he advised by short selling? If not, you should not spout off such claims.




    It's actually stupid if not outright dishonest. Zaky is famous for having crashed and burned on the advice he gave. Reading the rest of the comment you quoted, I think the "Constable" is just stupid.

  • Reply 7 of 72
    normmnormm Posts: 653member
    Yeah, Apple was a sure thing, they all said. Fat profits and a mountain of cash. The 800 lb. gorilla. Market share turned out to be much more important to Wall Street than profits and it continues to be so. So, Apple is finally in the black. Big deal. The so-called money-making machine finally broke even for 2013. Let's all tip our caps to Tim Cook for a job well done and pray 2013 doesn't end up as a repeat of 2012.

    Just because the stock market is irrational doesn't mean Tim Cook did anything wrong. Apple makes the best products and most of the profits in each of its markets. The market share issue is particularly screwy. Just focusing on the US, where we have good figures, more than 25% of *all* cellphones in use are now iPhones (up from 17.5% a year ago, and 10.2% two years ago). And almost all tablet use is on iPads, so they're killing the market they're actually competing in there also. Eventually people will notice!
  • Reply 8 of 72
    And now Value Walk; who posts absurd headlines and then won't let you read the story without subscribing; which nobody will do; is calling AAPL the Grinch the stole Christmas because the morons at Best, Buy, Walmart etc. gave away the farm as loss leaders over the weekend are SOLD OUT and can't get product reorders.
    As I said at least a dozen times in the last week; poor merchandising strategies by stupid low end retailers who used AAPL as a loss leader would sell out and be left out of the party for the rest of the season were spot on.
    There is no shortage at all except at those particular retailers. All reorders will go to AAPL stores and carriers. And now that the underbelly of retail is sold out they have nothing left to draw customers. AAPL will "allocate" all reorders needed to themselves first and then to Verizon etc. To send more to idiots who find it necessary to give it away to bring in customers to stores with little else to attract shoppers will not happen.
    WalMart shot their load and themselves in the foot. Now all they have left is coal.
  • Reply 9 of 72
    EXCUSE ME....IT WAS NOT VALUE WALK ....IT WAS SEEKING ALPHA WHO POSTS THE ABSURD GRINCH HEADLINES AND OTHER PROPAGANDA.
    THEY ARE AS STUPID AS WAL MART IF THEY THINK IT WILL HURT AAPL THIS HOLIDAY SEASON....OR AT ALL.
    THERE IS NO SHORTAGE.....JUST GO TO A REPUTABLE RETAILER.
  • Reply 10 of 72
    rogifanrogifan Posts: 10,669member
    normm wrote: »
    Just because the stock market is irrational doesn't mean Tim Cook did anything wrong. Apple makes the best products and most of the profits in each of its markets. The market share issue is particularly screwy. Just focusing on the US, where we have good figures, more than 25% of *all* cellphones in use are now iPhones (up from 17.5% a year ago, and 10.2% two years ago). And almost all tablet use is on iPads, so they're killing the market they're actually competing in there also. Eventually people will notice!
    There's not much you can do when a company spends $12B on advertising. Samsung's Galaxy products were everywhere. Go to the shopping mall or airport and you'd see Galaxy billboards everywhere. Here in the US, Galaxy commercials every other 5 seconds. Product placement on award shows, reality TV, Super Bowl, Olympics, etc. But Reuters just ran an article about how Samsung isn't getting bang for the buck with all this spending and how people are getting sick of the brand.
  • Reply 11 of 72
    rgh71rgh71 Posts: 122member
    The market doesn't price current profitability, but AAPL's potential going out a few years.

    Remember: "the market can stay irrational way longer than you can stay solvent!"
  • Reply 12 of 72
    fracfrac Posts: 480member
    2012 was a sick joke on Apple shareholders. So many analysts suckering mom and pop investors and Apple shareholders into believing Apple was going to be the first trillion dollar market cap company. Yeah, how Apple was going to shoot past $1000 a share. Andy Zaky was a major cheerleader in turning foolish and naive investors into paupers. There was always this talk about a cosmic Apple slingshot being pulled back which would propel Apple's share price into the stars. It only propelled Apple stock into a black hole. The mighty pull-back of $700 to $600 to $500 and eventually to $400. Andy Zaky and the rest of the liars who shorted Apple to death while telling them Apple was so undervalued that nothing could possibly go wrong. Wrong! Tim Cook and Apple handed the smartphone industry and most of its market share over the Samsung and that was the end of Apple shareholder's dreams of riches.

    Apple stock sunk into the Grand Canyon of losses and stayed there for most of 2013 while the rest of the stock market just took off into the stratosphere and many of the profitable tech companies saw added share gains of 20% to 30%. Microsoft got gains of 40% for the year. Heck, even H-P, that financially sick company doubled in share price. I hope a good lesson was learned about depending on Apple to get rich. Don't trust a a company that sits on a mountain of reserve cash while shareholders get reamed. Samsung became the top dog in mobile. Google laughed all the way to the bank and became Wall Street's tech darling of the year. Amazon made about a $1 worth of profit and gained about $160 a share in 2013. Jeff Bezos scoffed at Apple's inefficient business model.

    Yeah, Apple was a sure thing, they all said. Fat profits and a mountain of cash. The 800 lb. gorilla. Market share turned out to be much more important to Wall Street than profits and it continues to be so. So, Apple is finally in the black. Big deal. The so-called money-making machine finally broke even for 2013. Let's all tip our caps to Tim Cook for a job well done and pray 2013 doesn't end up as a repeat of 2012.

    Sympathies aside...
    Please quit with the self delusion.
    The posting world is full of your Apple fanboy posts going back many years, saying Apple will do this or that, crush everyone...blah blah...you talked yourself into a corner and bet your retirement by gambling on the stock market - and Wall St. won. They suckered you into a fairytale bubble of a self satisfied, sure-thing investment dream which popped because sanity prevailed. Since the big adjustment, you have naysayed Apple, it's leadership, it's prospects and products, with nary a word of self examination. You don't even seem to realise that AAPL is NOT Apple.
    Man up and quit with the whingeing...it changes nothing
  • Reply 13 of 72
    dasanman69dasanman69 Posts: 13,002member
    rogifan wrote: »
    There's not much you can do when a company spends $12B on advertising. Samsung's Galaxy products were everywhere. Go to the shopping mall or airport and you'd see Galaxy billboards everywhere. Here in the US, Galaxy commercials every other 5 seconds. Product placement on award shows, reality TV, Super Bowl, Olympics, etc. But Reuters just ran an article about how Samsung isn't getting bang for the buck with all this spending and how people are getting sick of the brand.

    A link to that article would've been nice.

    Edit: I found the article. Here's the link.

    http://www.reuters.com/article/2013/11/27/us-samsung-marketing-idUSBRE9AQ18720131127
  • Reply 14 of 72
    Andy Zaky and the rest of the liars who shorted Apple to death while telling them Apple was so undervalued that nothing could possibly go wrong. Wrong! Tim Cook and Apple handed the smartphone industry and most of its market share over the Samsung and that was the end of Apple shareholder's dreams of riches.

    Writing the latter makes you simply sound uninformed, but the former smacks of libel. Do you have some evidence that Zaky intentionally mislead anyone, or that he bet against anyone he advised by short selling? If not, you should not spout off such claims.

    Just ignore him. He's been sounding like he's off his meds since 2012.

    Unfortunately, losing money does strange things to some people.
  • Reply 15 of 72
    rogifan wrote: »
    But Reuters just ran an article about how Samsung isn't getting bang for the buck with all this spending and how people are getting sick of the brand.

    The reason is simple: I think it reminds Americans of the blatant thievery and shadiness every time they see one of those ads or billboards.
  • Reply 16 of 72
    dasanman69dasanman69 Posts: 13,002member
    Unfortunately, losing money does strange things to some people.

    It's even stranger when a company loses money. It's like people jumping onto a sinking ship instead of off.
  • Reply 17 of 72
    maestro64maestro64 Posts: 5,042member

    We all know that the analysis and Wall Street over drove Apple stock back in 2012. I seen this many times over with a company with good fundamentals like Apple. If you look at the first graph and just draw a straight line from 2008 or even further back you will see the peek in 2012 was greater than where Apple was naturally heading. If you extend that line to the end of 2013, you will see Apple is about where you would expect it to be based on it same fundamentals.

     

    The Market movers drove up the hype on the stock to run up its price to a point where they knew it could not go any higher and then began shorting the hell out of if. The fast way to make money on Wall Street is to short a stock then start putting out bad news. Stocks fall far faster then they raise, and when it starts falling investment company shoot first and ask questions later and this is exactly what happen here. You can look at any number of stocks which saw skyrocketing increases in a short period of time.

     

    I been long on Apple, and learned to ignore the noise, and as it stand Apple is still the best value of my entire investment portfolio even with all the ups and downs plus the Div it is kicking out.

  • Reply 18 of 72
    tundraboytundraboy Posts: 1,878member
    Quote:



    Originally Posted by Rogifan View Post



     But Reuters just ran an article about how Samsung isn't getting bang for the buck with all this spending and how people are getting sick of the brand.

     

    Saturation advertising makes a lot more people aware of your product, some would actually buy it.  Unfortunately, if your product is no good, what people become aware of is not just your product, but how bad it is.  And worse, if you made it sound as if your product is way better than it really is, then people will not only dislike your advertised product, they'll dislike your company and brand as well.  Judging from how little value their advertising returned, and the recent news of worldwide 'crisis awareness' management meetings, Samsung might have fallen into this trap.

     

    I suspect the reason Samsung's advertising and promotions is so inept, why they hit so many sour notes, is that they really never learned to work hard to market their products.  They never had to.  The Korean consumer is very patriotic; they're an easy sell for Korean companies.  (They kept Hyundai afloat through years of really crappy cars.  There were years in the 80's and 90's, when Hyundai started selling outside the Korean market, where only overseas Koreans would buy a Hyundai.  Man, those were truly awful cars -- from the Pony all the way to the Tiburon.)  So Samsung probably thought "we just need to do what we normally do, -- just make people aware of our product and the sales will come".  Problem is, Koreans might forgive poor product quality from a Korean brand-name, but the rest of the world doesn't tie love of country to their purchasing decisions that closely.

  • Reply 19 of 72
    Quote:

    Originally Posted by Corrections View Post

     

     

    Writing the latter makes you simply sound uninformed, but the former smacks of libel. Do you have some evidence that Zaky intentionally mislead anyone, or that he bet against anyone he advised by short selling? If not, you should not spout off such claims.




    It's ridiculous to hold anyone accountable for the Stock Market. That cesspool is not only irrational -- it's intentionally irrational. As soon as you find a pattern, an application will exploit it 3,000 times per second.

     

    If we based Apple's stock valuation on real fundamentals and performance, it would indeed be a $1 Trillion company. It has no debt, most of the VALUE here is represented by real things or even cash holdings. It's as if all their IP and market profitability had no value.

     

    Amazon.com and Google do not have these higher margins or EPS. How do companies like IBM get 60 years (assuming nothing changes) to earn back while Apple is around 24 (well, last I bothered looking at this nonsense). I'm not invested anymore because my days of earning a decent living are over. And I got out at the right time, because I'm not investing in someone else's game for chumps.

     

    Really, there's no point arguing about what a stock should or shouldn't be because you should invest in your own business, or in Kickstarter -- or just plunk it in real estate or a Credit Union. Forget the Stock Market and let those people play with their own money for a change.

  • Reply 20 of 72
    Quote:

    Originally Posted by tundraboy View Post

     

     

    Saturation advertising makes a lot more people aware of your product, some would actually buy it.  Unfortunately, if your product is no good, what people become aware of is not just your product, but how bad it is.  And worse, if you made it sound as if your product is way better than it really is, then people will not only dislike your advertised product, they'll dislike your company and brand as well.  Judging from how little value their advertising returned, and the recent news of worldwide 'crisis awareness' management meetings, Samsung might have fallen into this trap.

     

    I suspect the reason Samsung's advertising and promotions is so inept, why they hit so many sour notes, is that they really never learned to work hard to market their products.  They never had to.  The Korean consumer is very patriotic; they're an easy sell for Korean companies.  (They kept Hyundai afloat through years of really crappy cars.  There were years in the 80's and 90's, when Hyundai started selling outside the Korean market, where only overseas Koreans would buy a Hyundai.  Man, those were truly awful cars -- from the Pony all the way to the Tiburon.)  So Samsung probably thought "we just need to do what we normally do, -- just make people aware of our product and the sales will come".  Problem is, Koreans might forgive poor product quality from a Korean brand-name, but the rest of the world doesn't tie love of country to their purchasing decisions that closely.


     

    Samsung's marketing is designed around a CROWDED marketplace. They've been used to a bunch of me-to products and trinkets that get disposed of in a year. Car stereos, home video, all kinds of electronics, some people can even remember the brand they bought, most people leave at least 80% of these items on a shelf or a drawer in a year. Not so for Smart phones - they are workhorses and the most used item people have.

     

    So the "grab the sale and go" strategy isn't going to help with follow-up sales. However, having said that, the TOP TIER Samsung products are probably good -- because they helped manufacture the iPhone with someone else's research, it aught to be. The problem is, Samsung as a brand has a lot of the junk phones as well -- and Apple doesn't sell any junk. Everyone with a Junk Android disposable pretending to be a "Smart Phone" which is at least half of all smart phones sold, is going to get buyers remorse because they thought it would be "just as good as an iPhone."

     

    While the Galaxy phones might still be good for watching videos and playing Angry birds, they aren't every shopper's experience. So the loss in retention is going to be all those 2nd tier phones -- and I'm willing to be, that's where Samsung will lose it's luster.

     

     

    Remember when all the armchair experts were urging Apple to "just get people a cheap iPhone" and go for market share? Well, they have the top brand and the race to the bottom leaves margins too thin for real research. I'd like a more affordable iPhone -- but I'm not in a hurry to get a "crap phone."

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