Site icon MacDailyNews

Why Apple won’t have a $1 trillion market capitalization any time soon

“With two consecutive blowout quarters, a market capitalization of $750 billion and a forward P/E ratio under 12 minus cash, many think a $1 trillion valuation for Apple is possible within the year,” Brian Nichols writes for Seeking Alpha. “After all, it seems inevitable, and while I believe Apple will one day be a trillion-dollar company, I do think it will be several years down the road.”

“Despite its stock being nearly 27% higher since September 18, 2012, Apple’s market capitalization has only increased 11.5%. The reason is because Apple has rapidly reduced its shares outstanding during this span via buybacks to the tune of 13%,” Nichols writes. “That’s why Apple’s stock has outperformed its market cap by nearly 100%, reflecting the market’s attempt to apply a higher value to Apple and reflect its very significant fundamental improvements.”

“At today’s level Apple looks very attractive and thanks to the company’s willingness to keep buying back stock at record amounts, investors should feel confident that Apple’s stock will continue to outperform the market regardless of market capitalization growth. Apple is essentially handing investors stock gains with its large buybacks, keeping a potential psychological limit in the distance, and all the while accumulating even more cash to both reinvest in the business and fund larger buybacks in the future,” Nichols writes. “Apple’s buybacks are a great thing for investors, even if it prolongs expectations for Apple to soon become the first ever trillion-dollar company.”

Much more in the full article – check out the chart – here.

MacDailyNews Take: Not to mention also handing investors dividends along the way.

Exit mobile version