SAN FRANCISCO: Apple Inc on Thursday became the first $1 trillion publicly listed U.S. company, crowning a decade-long rise fueled by the ubiquitous iPhone that transformed it from a niche player in personal computers into a global powerhouse spanning entertainment and communications.
Apple has rallied about 9 percent since Tuesday when it reported June-quarter results above expectations and said it bought back $20 billion of its own shares. It was Apple’s best two-day run since April 2014.
In a memo to Apple’s more than 120,000 employees on Thursday that was seen by Reuters, Chief Executive Tim Cook said the $1 trillion valuation was “a significant milestone” that gave Apple employees “much to be proud of.” But he said it was “not the most important measure” of the company’s success.
“Financial returns are simply the result of Apple’s innovation, putting our products and customers first, and always staying true to our values,” Cook said in the memo.
Started in the garage of co-founder Steve Jobs in 1976, Apple has pushed its revenue beyond the economic outputs of Portugal, New Zealand, and other countries. Along the way, it has changed how consumers connect with one another and how businesses conduct daily commerce.
Apple’s stock market value is greater than the combined capitalization of Exxon Mobil Corp, Procter & Gamble Co, and AT&T Inc. It now accounts for 4 percent of the S&P 500.
One of three founders, Jobs was driven out of Apple in the mid-1980s, only to return a decade later and rescue the computer company from near bankruptcy.
He launched the iPhone in 2007, dropping “Computer” from Apple’s name and super-charging the cellphone industry, catching Microsoft Corp, Intel Corp, Samsung Electronics Co Ltd and Nokia off guard. That put Apple on a path to overtake Exxon Mobil in 2011 as the largest U.S. company by market value.
During that time, Apple evolved from selling Mac personal computers to becoming an architect of the mobile revolution with a cult-like following.
Jobs, who died in 2011, was succeeded as chief executive by Tim Cook, who has doubled the company’s profits but struggled to develop a new product to replicate the society-altering success of the iPhone, which has seen sales taper off in recent years.
In 2006, the year before the iPhone launch, Apple generated less than $20 billion in sales and net profit just shy of $2 billion. By last year, its sales had grown more than 11-fold to $229 billion – the fourth highest in the S&P 500 and net income had mushroomed at twice that rate to $48.4 billion, making it the most profitable publicly listed U.S. company.
‘STILL SEE UPSIDE’
Jeff Carbone, co-founder of Cornerstone Financial Partners in Charlotte, North Carolina, has included Apple in his clients’ portfolios for about a decade. Recently, some of his older clients have bought Apple shares for their grandchildren.
“We still see upside from it, and as new money gets deposited we continue to buy, preferably on the dip,” Carbone said.
Apple’s stock has risen over 30 percent in the past year, fueled by optimism about the iPhone X, launched a decade after the original. Also propelling Apple higher in recent months was Apple’s announcement that it earmarked $100 billion for a new share repurchase program.
In its report on Tuesday, Apple sales led by the iPhone X, which sells for about $1,000, pushed quarterly results far beyond Wall Street targets, with subscriptions from App Store, Apple Music and iCloud services bolstering business.
“The markets are starting to recognize the value of its platform and services more and more, and that’s what is being reflected in the increase in market capitalization,” said Brad Neuman, director of Market Strategy at Alger, a growth equity asset management firm in New York City.
Even with its $1,000,000,000,000 stock market value, many analysts do not view Apple’s shares as expensive. Shares of Apple this week traded at about 15 times expected earnings, compared with Amazon at 82 times earnings and Microsoft at 25 times earnings.
Adjusting for four stock splits over the years, Apple debuted on the stock market for the equivalent of 39 cents a share on Dec. 12, 1980, compared with Thursday’s high of $208.38.
In 2015, Apple joined the Dow Jones Industrial Average, one of capitalism’s most exclusive clubs. Since 1980, IBM Corp, Exxon Mobil, General Electric Co, and Microsoft have also alternated as the largest publicly listed U.S. company.
In 2007, Chinese government-controlled PetroChina briefly reached a stock market value of about $1.1 trillion following its public listing in Shanghai. It is now worth about $200 billion, according to Thomson Reuters data.
One of five U.S. companies since the 1980s to take a turn as Wall Street’s largest company by market capitalization, Apple could lose its lead to the likes of Alphabet Inc or Amazon.com Inc if it does not find a major new product or service as global demand for smartphones loses steam.
Hot on Apple’s heels is Amazon.com, the second-largest listed U.S. company by market value, at around $880 billion, closely followed by Google-owner Alphabet and by Microsoft.