Apple Regains $3 Trillion Valuation, First-Listed Company To Reach The Milestone

The iPhone maker had previously reached a market value exceeding $3 trillion for a brief period in January 2022. However, it couldn't sustain that market cap by the end of the trading day.

Apple has made history by becoming the first publicly traded company to reach a market value of $3 trillion. The company's shares closed 2.3 per cent higher at $193.97 on Friday trade, pushing its market value to an astounding $3.04 trillion. The achievement marks another milestone for a technology ain't that has reshaped the smartphone and PC sector with a line-up of products that churn out eye-popping profits.

As per a PTI report, Apple, alongside tech companies such as Microsoft and chipmaker Nvidia, played a significant role in driving the S&P 500 to a nearly 16 per cent gain during the first half of the year.

Founded 47 years ago by Silicon Valley icon Steve Jobs, the iPhone maker had previously reached a market value exceeding $3 trillion for a brief period in January 2022. However, it couldn't sustain that market cap by the end of the trading day. Subsequently, Apple experienced a downward trend, leading to a dip in market value below $2 trillion earlier this year, the report said.

Factors contributing to this decline included a slowdown in growth and investor concerns regarding rising interest rates that impacted the entire technology sector.

As per Bloomberg, the unexpected market rally has taken wall street analysts by surprise, raising doubts about its sustainability amid the possibility of further interest rate hikes by the US Federal Reserve.

Nonetheless, investors continue to be optimistic about the growth prospects offered by artificial intelligence and they are also drawn to the strong qualities exemplified by Apple, such as a solid balance sheet, resilient revenue streams, and a formidable competitive position, the report said. 

Apple's Valuation Journey So Far, Competitors Ahead

Apple's remarkable valuation can be attributed to the technology empire built since Steve Jobs returned to the company in 1997. Under his leadership and subsequently under CEO Tim Cook, Apple's profitability has soared. The iPhone, introduced in 2007, remains a key driver of its success, generating over half of the company's revenue. 

In addition to the iPhone, Apple's diverse product lineup, including Macintosh, iPad, Apple Watch, and services like music streaming and app store fees, contribute to its substantial revenue. Despite its previous financial struggles, Apple now allocates billions annually towards dividends and stock repurchases while maintaining a significant cash reserve.

Apple ascended to become the world's most valuable stock in 2011, with a market cap of under $340 billion, representing around 3.3 per cent of the S&P 500, as per Bloomberg. Since then, it has rarely relinquished this title. In mid-2018, Apple reached a milestone of $1 trillion in value, and in August 2020, it became the first US company to surpass a $2 trillion valuation in August 2021, the report noted. However, Saudi Aramco was the first company overall to achieve a $2 trillion market cap. Remarkably, Apple achieved a market value of $3 trillion in less than two years after surpassing the $2 trillion mark.

Microsoft holds the position as the second-most valuable public company with a market value of $2.5 trillion, followed by oil giant Saudi Aramco with a market value of $2.08 trillion. Alphabet, the parent company of Google, along with Amazon and Chipmaker Nvidia, have market values exceeding $1 trillion.

Although Apple briefly surpassed the $3 trillion mark in early 2022, it failed to maintain that level by market close. 

As per the report, reaching the $3 trillion milestone doesn't guarantee smooth sailing for Apple going forward. The stock currently trades at approximately 30 times forward earnings, a decrease from its peak above 35 in 2020, but still considerably higher than its 10-year average multiple of 17.9.

However, it added that Citi's analysis suggests that there is a potential for Apple stock to rise by approximately 30 per cent, a significant increase that would bring Apple's valuation close to $4 trillion. This positive assessment reflects the ongoing optimism surrounding Apple's future prospects.

While Citi's bullish rating on Apple stands out, overall analyst sentiment towards the stock has been cautious amid the stock's upward trajectory this year. Less than 70 per cent of the firms tracked by Bloomberg currently recommend buying Apple, making it the trillion-dollar company with the lowest ratio of buy recommendations. The consensus rating, which represents the balance of buy, hold, and sell ratings, is also nearing its lowest level since November 2020. 

Additionally, Apple's stock price is currently trading above the average price target set by analysts, indicating that they may not anticipate significant additional gains from current levels.