Apple's Market Capitalization Hits $500 Billion, Stock Up 34% in 2012

[bretm]

Well, all Mac owners say that. The truth is that they usually have less problems with a Mac because they can do less on OS X than they can do on Windows. OS X has a Unix foundation, but most Mac users don't even know how to get there or what to do with the Terminal. They stay on the GUI level - and that GUI level has a rather limited features set when compared to a Linux or Windows system.

Windows and Linux give you more rope to strangle yourself with. Apple keeps its users on a short leash. That creates the illusion that Macs are more reliable than Windows systems.

And Macs -are- overpriced. You pay a premium for the brand logo and the design. Which is okay when you like their design. But let's not fool ourselves by believing that you get better hardware with a Mac; when you spend the same amount of money on a PC, you'll get MUCH more bang for the buck. And you'll even get better support from Dell than you will ever get from Apple.

Anyway, none of this is the topic here. I don't own any Apple stocks, but obviously they're doing very well. Good for them. Let's see how long this strain of fortune lasts without Steve Jobs. We know what happened with Microsoft after Bill Gates left the company and left it in the hand of somebody else.

When the Mac Pros are fresh, price out the equivalent HP or Dell workstation. I think you'll find very little difference. Yes, I know that the MacPros haven't dropped in price or been updated. There isn't an apple to apple comparison right now. But in the past, their notebooks and towers have been on par or occasionally cheaper. And the build quality and customer satisfaction says it all.

I mean, my father in law just bought a nice i5 desktop system from Vision computers with 8gb of RAM for $1500. WTF? You can get an i7 iMac with built in screen for not much more. It's pretty established that iMacs are an amazing deal. What with the best monitors in the biz built in. (I have a DELL monitor too btw - pos by comparison).

You say linux and windows give you more power features... in my experience windows users are the masses. They definitely don't dig into the power of the computer they have. eMail, web browsing, word processing like the rest of the world. It's only in geekdom circles that people are digging into terminal and unix or dos or whatever you've got there on the PC. The point being - on Mac or PC, 99.9% of the users could give a rats behind. They just want it to work. And having it work longer and hold it's resole value isn't too shabby either.

Let's just hope Apple gets back to making some awesome towers.

 

[vvswarup]

Enough with the FUD about Microsoft saving Apple! Apple was NOT near bankrupt when Steve came back. They were in big trouble, no doubt about that, but not anywhere near insolvency. Microsoft's purchase of non voting stock did NOT "save" Apple. It was a small token to show continued support as well as continuing to develop Office for the Mac. $150 million was pocket change for both companies at the time. Gates and Jobs also resolved the patent issues festering between them. Steve Jobs saved Apple, not Bill Gates.

Also, Microsoft was facing an antitrust lawsuit. I could be wrong, but helping out a competitor to show the government that Microsoft did in fact have healthy competition was probably on the list of reasons as to why Microsoft made the investment in Apple.

 

[jaison13]

i'd like to see them put some of that money into buying tech.there are a few companies that have done some interesting things that would benefit apple products. one i liked was a way to make your stylus pressure sensitive on the current apple screens. it also is palm neutral. i doubt it would cost much but would be a nice piece of tech to add to the iPad.

 

[bretm]

Interesting that a company who simply produces 1 model of tablets, 1 model of phones, a few models of mp3 players, and a few models of overpriced computers has a market cap this high.

Apple will need to continue innovating and selling more than just 10 SKUs of products to hold this kind of value. I personally think the stock is extremely inflated. Sooner or later Apple will need to introduce some new products to hold this high value...the iPod line has been oversaturated for years...that's 25% of their product line...the iPhone and iPad can't carry Apple forever...and my guess is the iPhone has 2-3 years left before everything on the cell market is very similar to the iPhone (Android). If nothing rivals the iPad over the next few years, ok, cool....but then Apple is a company that banks its business on 1 product.

Don't get me wrong...I like Apple...they are obviously on top of the world right now....but it could come right back down to reality ($90/share) in 1-3 years in my opinion as iPhone and iPad competition increases and if Apple doesn't expand its overall Apple product lineup. I am interested in seeing what Apple has in store for tv...if they do it right, that could make Apple some big cash for 10-15 years all by itself.

WTH? How many models of oil does exxon sell?

 

[IJ Reilly]

97billion in december. It will be well over 100b by now.

Agreed. Since they were accruing cash at the rate of about $1b a week in 1Q I'd say they're probably at around $105b now. They could end the quarter with $110b easily. (For whatever good that does and for whatever it means to stockholders.)

 

[vvswarup]

Cash on the company's books does not add anything to shareholder value. It does not provide any meaningful level of support for share price. If at any time Apple had to fall back on their cash-on-hand to fund operating expenses, this would mean that the company was no longer profitable. Try to imagine what would happen to the share price if Apple started losing money, instead of raking it in. You would soon see how little that $100 per share in cash means.

You are right that cash itself does not add anything to shareholder value. However, cash does provide a support for share price. Apple has around $100 billion in cash. It has about 1 billion shares outstanding. Suppose Apple's stock price dropped to $95 per share. Apple's stock is worth less than its cash. Apple would be taken private immediately.

 

[top]

190 for me

 

[IJ Reilly]

Also, Microsoft was facing an antitrust lawsuit. I could be wrong, but helping out a competitor to show the government that Microsoft did in fact have healthy competition was probably on the list of reasons as to why Microsoft made the investment in Apple.

The antitrust suit had nothing to do with the Apple investment. If it was true that Microsoft had to prop up a competitor, then that certainly would not have helped Microsoft's case that they faced healthy competition. It could be interpreted in just the opposite way, in fact. Apple had virtually nothing to do with the antitrust case anyway. It was almost entirely about the internet and browsers. The main charge against Microsoft was that they were leveraging Windows to destroy competitors in other markets, such as web browsers.

 

[cxny]

Only 50 Shares But...

 

[pdc123]

Interesting that a company who simply produces 1 model of tablets, 1 model of phones, a few models of mp3 players, and a few models of overpriced computers has a market cap this high.

Apple will need to continue innovating and selling more than just 10 SKUs of products to hold this kind of value. I personally think the stock is extremely inflated. Sooner or later Apple will need to introduce some new products to hold this high value...the iPod line has been oversaturated for years...that's 25% of their product line...the iPhone and iPad can't carry Apple forever...and my guess is the iPhone has 2-3 years left before everything on the cell market is very similar to the iPhone (Android). If nothing rivals the iPad over the next few years, ok, cool....but then Apple is a company that banks its business on 1 product.

Don't get me wrong...I like Apple...they are obviously on top of the world right now....but it could come right back down to reality ($90/share) in 1-3 years in my opinion as iPhone and iPad competition increases and if Apple doesn't expand its overall Apple product lineup. I am interested in seeing what Apple has in store for tv...if they do it right, that could make Apple some big cash for 10-15 years all by itself.

Erm, what?

http://tech.fortune.cnn.com/2011/07/26/is-apple-undervalued-at-404/

"In fact [Mihalache] concludes that, based primarily on the PEG ratio, Apple's shares are even more undervalued now than they were a year ago.

<snip />

Mihalache tends to set high bars for Apple. But in our most recent earnings smackdown, in which we compared the Q3 2011 estimates of 48 Apple analysts -- professional and amateur -- Mihalache's were, by a large margin, the best."

I'm not saying he's right or wrong, but people who would know better than we would strongly disagree with you.

 

[IJ Reilly]

You are right that cash itself does not add anything to shareholder value. However, cash does provide a support for share price. Apple has around $100 billion in cash. It has about 1 billion shares outstanding. Suppose Apple's stock price dropped to $95 per share. Apple's stock is worth less than its cash. Apple would be taken private immediately.

Not so long ago, AAPL's market cap was very close to cash-on-hand value, and way below enterprise and book value. Early 2000s timeframe, after the tech bubble burst. The company was not taken private at that point. In any case your argument that AAPL has intrinsic price support at 80% less than its current market value, even if true, is not exactly reassuring.

Edit: And you should consider the scenario by which such a thing could come to pass. Apple would have start losing money hand-over-fist for 80% of its market value to vanish. By that time they'd have burned through a lot of that $100 per share in cash, chasing a downwards spiral.

 

[Thunderhawks]

I don't get why people need to find something negative just because it's Apple.

Great to have a strong American company that does well worldwide.

"Won't be able to keep it up, $ 90, overvalued future, hitting value of numbers etc.etc."

Let me make it simple:

If you have Apple stock keep it and put protective stops under it!

If you don't have stock, buy some and put protective stops under it!

If you don't do stocks, just buy the Apple products you like or not.

 

[PracticalMac]

Should have bought it when it was $500/share!!

 

[Chupa Chupa]

Surveys and wishful thinking do not equal units sold.

And all your links are for tablets.

Um... Quoting from the Forbes article I linked to earlier:

On Apple's earnings call tonight, COO Tim Cook said that 80% of the Fortune 100 has deployed or is testing the iPad tablet.

How is that "wishful" thinking? And, yes, everything I linked to is tablets. I could have included iPhones too. Those two products make up half of Apple's profits and are the growth engine of the company. iPads and iPhones are displacing traditional computers. Apple's made huge headway in enterprise, whether you want to acknowledge it or not.

 

[Taz Mangus]

Surveys and wishful thinking do not equal units sold.

And all your links are for tablets.

Apple has never been business-friendly...EVER! Maybe, just maybe, Tim Cook will figure out that there's a whole nutha billion users out there in businessland that could use Apple products. But I really think that ship sailed a long time ago.

iOS devices all come with the Apple baggage...iTunes, Apple approved apps, Apple hardware, Apple OS, Apple Support, Apple pricing...all Apple lock-in. Although this may be fine with consumers, it is NOT fine with businesses. Not sure if you ever worked in IT but IT does not like lock-in...and there will not be an IT Revelation that lock-in is now the defacto standard or cool or hip.

iOS devices appearing in businesses are definitely not IT sanctioned/approved. There have been numerous reports/studies regarding this. We all know that the iPhone is simply a computer with the ability to make phone calls. Every company on the planet forbid you bringing in your own, personal computer and connecting to the corporate network...the iPhone is no different. IT may be tolerating it right now, but IT is definitely wary of the iPhone/iPad's security.

Apple is making inroads into business, government and education. Might want to read up on what GE is doing. Might want to read up on what Apple is doing for education. Even government is seeing the value of using Apple iOS devices.

 

[dukebound85]

MSFT was worth $642 billion in September 2000 (http://money.cnn.com/galleries/2010/fortune/1002/gallery.biggest_losers.fortune/4.html).

Also, Cisco and Intel both peaked at over $500 billion in 2000.

And that is 2000 dollars correct, not 2012 dollers? Even more impressive

 

[cxny]

And that is 2000 dollars correct, not 2012 dollers? Even more impressive

Except those "bubble" prices were based on speculation with P/E ratios of almost 100. AAPL has a P/E ratio of 11 which show the market believes it's still undervalued, 13-14 being more typical valuations.

 

[Buildbright]

Enough with the FUD about Microsoft saving Apple! Apple was NOT near bankrupt when Steve came back. They were in big trouble, no doubt about that, but not anywhere near insolvency. Microsoft's purchase of non voting stock did NOT "save" Apple. It was a small token to show continued support as well as continuing to develop Office for the Mac. $150 million was pocket change for both companies at the time. Gates and Jobs also resolved the patent issues festering between them. Steve Jobs saved Apple, not Bill Gates.

You are wrong unless you want to argue with Steve Jobs himself. Apple was near bamkruptcy.

Microsoft buying stock was a two way street advantage for both Apple and Microsoft. It gave the company a favorable cash injection, and it borrowed Microsofts good reputation at the time which gave hope to anylasts and other software partners.

Don't foget it helped the relationship between the two companies like getting Office for the Mac updated. In turn Microsoft made money from Apple versions and used it as leverage in the anti-trust cases.

Microsoft did not save Apple. It gave Apple a much needed Ally. Steve Jobs and all the hardworking, talented people saved Apple. Not to mention all the consumers who bought they're products.

 

[IJ Reilly]

Except those "bubble" prices were based on speculation with P/E ratios of almost 100. AAPL has a P/E ratio of 11 which show the market believes it's still undervalued, 13-14 being more typical valuations.

Actually, AAPL's current PE is 15. But all this shows is that the market believes that a PE of 15 currently represents the stock's fair value. Tomorrow, next week and next month it will probably be something different, higher or lower.

 

[IJ Reilly]

You are wrong unless you want to argue with Steve Jobs himself. Apple was near bamkruptcy.

Microsoft buying stock was a two way street advantage for both Apple and Microsoft. It gave the company a favorable cash injection, and it borrowed Microsofts good reputation at the time which gave hope to anylasts and other software partners.

Don't foget it helped the relationship between the two companies like getting Office for the Mac updated. In turn Microsoft made money from Apple versions and used it as leverage in the anti-trust cases.

Microsoft did not save Apple. It gave Apple a much needed Ally. Steve Jobs and all the hardworking, talented people saved Apple. Not to mention all the consumers who bought they're products.

Some myths die hard. Apple was not near bankruptcy in 1997. Not anywhere close, really. They still had a fair amount of cash on hand (over $1b) and not much debt. They'd have had more credit available, had they needed it. The difference between life and death for Apple was not $150m.

Microsoft got no advantage from buying stock in Apple, except what money they might have made in selling it. The "endorsement" from Bill Gates that Steve engineered was the real story here. It helped turn around Apple's image in the minds of the public. Everybody seemed at the time to be trying to figure out how "Bill won again" in this deal, when it's clear from the record of what actually occurred that Steve pulled off a huge PR coup. That, and the subsequent products, are what saved Apple.

Microsoft got no leverage in the antitrust case from this. None whatsoever.

 

[dukebound85]

Actually, AAPL's current PE is 15. But all this shows is that the market believes that a PE of 15 currently represents the stock's fair value. Tomorrow, next week and next month it will probably be something different, higher or lower.

What other factors besides PE should one look at? I ask as if a PE of 15 is considered a fair evaluation, why do not stocks always converge on that number? If that was the only factor, I imagine it would be fairly easy to make a living and a killing in the stock market

 

[joepunk]

If I had invested in 2005 I would be sitting on close to 300k in stock right now. Excuse me while I go cry into my coffee.

I wish I had too. Now if you will excuse me I have go and cut some onions. That way I blame the tears on the onions

 

[IJ Reilly]

What other factors besides PE should one look at? I ask as if a PE of 15 is considered a fair evaluation, why do not stocks always converge on that number? If that was the only factor, I imagine it would be fairly easy to make a living and a killing in the stock market

I don't know. Seriously. If it was simply a matter of looking down a list of numbers and finding "undervalued" stocks then as you say anyone could make a killing in the stock market. The problem is, the markets are constantly pricing in all known information, so the only way to get an advantage is to take a risk, i.e., to guess about the future.

Individual stocks don't necessarily converge on any given PE number, but the average of multiple stocks (such as the S&P 500) tend to run in range ±15. The spread is great over time and over individual stocks.

During the mid-2000s, AAPL sold for a long time at a PE over 100. Did that mean that AAPL was "overvalued" during that timeframe? Probably some thought so.

 

[sazivad]

Let's also remember that in this high tech environment, Apple CLEARY does not sell to businesses. Apple sells to consumers. Fine. Great. Apple is a consumer electronics company. But unlike Bose and Sony (for example) Apple sells zippo to businesses. Therefore, Apple is (for better or worse) 100% reliant on consumers.

Then why all the Exchange support in iOS, among other enterprise features?

And why does this article exist (make sure you read the last paragraph)?

Don't get me wrong... Apple will eventually fall, like everything else. Whether that happens in a couple years or a couple decades is up for debate. Me? I say decades, in the plural.

But I'm no analyst.

Edit: I see Chupa Chupa and rdowns beat me to it.

 

[ownamac]

AAPL closed at 78.20 on Jan 20, 2009. Anyone underwater shares then and still holding now no doubt learned something about the emotional side of investing.

It does cross my mind that back then I coulda, woulda, shoulda loaded up more, but holding my $85 underwater shares at that point was pretty much all I had in me at the time.

Interesting to recall what was going on with Apple, the markets, and the economy back then. It was a scary time and easy now to forget that feeling of wondering just how low things could go.