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Apple’s $3 trillion valuation is ripe fruit

Apple has raced to a $3 trillion market value from $1 trillion in just 41 months. Despite that surge and significant risks, the technology giant run by Tim Cook can continue to evade the law of large numbers.

No public company has ever been as big as the iPhone maker, which now accounts for 7% of the S&P 500 Index. After Microsoft caught up a few months ago, Apple pulled ahead again easily. Google owner Alphabet tips the scales at less than $2 trillion, as do oil behemoth Saudi Aramco and e-commerce pacesetter .

Apple’s revenue, $366 billion in the most recent fiscal year, is in the same ballpark as the GDP of Israel or Hong Kong. The company returned nearly $200 billion to investors through share buybacks and dividends last year, more than the entire market value of any but the top 40 or so groups in the S&P 500.

For more than a decade leading up to 2019, the company’s shares typically traded at a price-to-earnings ratio discount to the broader market. That’s no longer the case, but today’s stock price doesn’t look badly overstretched. At roughly 30 times earnings, it’s only a little richer than the S&P 500 overall. An enterprise value of about 8 times revenue makes Apple cheaper than, say, Microsoft. Adjusting for one year’s forecast growth, per Refinitiv, provides the only hint that Cook has his work cut out: A higher price-earnings-to-growth or PEG ratio suggests more demanding expectations for Apple than for most other tech giants.

There are threats to the hefty percentage that Apple extracts from app developers like Epic Games, which is challenging Cook’s company in court . Those income streams matter for top-line growth. And China, which accounted for a fifth of revenue last fiscal year as well as being a key supplier for sales elsewhere, is a source of both supply-chain and trade-policy uncertainty.

Still, after a decade at the helm, Cook has capitalized on the crown-jewel smartphone created by his predecessor, Steve Jobs. With what seem like only incremental product enhancements and merely ancillary revenue from the app store and services, Apple’s financial results have surprised doubters. Microsoft, for one, may be surfing surer technology waves. But it would ignore the lessons of recent years to count Apple out. Next stop $4 trillion? Reuters


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