LOL Numbers: If Google, Amazon and Microsoft can grow to a combined market cap over $1 trillion, what’s stopping Apple?

“The market’s reaction Friday to the latest earnings results from Google, Amazon and Microsoft (read Fortune’s coverage here, here and here) got reader Carl Lambert — who posts here as RadarTheKat — thinking about the ‘law of large numbers,’ one of the most abused phrases in business journalism.”

“Here’s the article I wish someone would write,” he says. “And then he proceeded to write it.”

Among the arguments why Apple shares cannot outperform the market or its peers has been the oft repeated law of large numbers; the claim that Apple is too big to meaningfully grow and that its market cap, at nearly $680 billion, is so big that there aren’t enough investment dollars to move the needle. But last night the market unwittingly provided an irrefutable counter argument by taking the combined market caps of Google, Amazon and Microsoft to nearly $1.2 trillion. The market seems to have no trouble adding $70 billion to these three companies, whose combined profits are a fraction of Apple’s, but won’t allow the same for a single company. — Carl Lambert

“I last wrote about the so-called ‘law of large numbers’ a few years ago,” P.E.D. writes, “‘For the record, the law of large numbers—once shortened to ‘LOL numbers’ (as in ‘laugh out loud’) by a wag in our comment stream, was first formulated in the 16th century…'”

Read more in the full article – recommendedhere.

MacDailyNews Take: The misused “Law of Large Numbers” is nothing more than a logical fallacy. There is certainly no “law” prohibiting Apple from achieving a market value of $1 trillion and beyond.

As we wrote back in April 2012:

What is Apple’s share of the smartphone market? What’s Mac’s share of the PC market? How many hundreds of millions are primed to buy their first tablet, a market that Apple created and dominates with iPad?

Apple’s current size is meaningless because their addressable market is virtually limitless.

SEE ALSO:
Apple: Breaking the law of large numbers and getting away with it – November 3, 2014
Apple and the myth of ‘The Law of Large Numbers’ – April 19, 2012

[Thanks to MacDailyNews Reader “Bill D.” for the heads up.]

17 Comments

  1. The Law of Large Numbers is not a logical fallacy; the Italian mathematician Cardano formed what became the law as an observation on probability and large numbers of trials/experiments/results. The application of the law to companies or stocks is an inappropriate use, the law itself is valid.

    1. That must be why MacDailyNews wrote: The misused “Law of Large Numbers” is nothing more than a logical fallacy.

      Every word has a meaning. The operative word here is “misused.”

    2. The only thing I can think of for Wall Street’s craziness is that that they believe Apple is just one misstep away from being out of business. A bad iPhone update, or it’s revealed that Tim Cook really works for the NSA, or something like that. Then poof, Apple Inc. is no more.

  2. Because … the largest cap stock is the easiest to manipulate with all the tactics and history of what moves that stock coupled with the algorithms the traders use against the unwary.

    Nothing new here.

  3. It is becoming more and more clear that the market has become dominated by traders who do their business based far more on emotion than logic. The best traders are able to make enormous sums of money by manipulating the emotions that drive the market. There seems to be little need for these guys to use fundamental economic or finance principles, knowledge, history, or education. These loose canons leave our economy, and our country vulnerable to the market instabilities they create. Why is this short, (ultra short, fractional) trading legal?

    Long investors provide a stable foundation for our economy, and provide the needed capital for companies grow and prosper and they should be rewarded. Ultra-short term traders/hedgers provide volatility and instability in the system and act on rumors and infotainment to create even more volatility that they can then use to pump more money out of the system. Why do we want to allow this to continue?

    1. This is the underlying truth about us as a people. We think we’re so sophisticated with our computers and spreadsheets analyzing complex data. But underneath it all we operate and make decisions primarily on emotion. The few traders who truly understand this and know how to manipulate the heard make a killing. The rest are lost in what they perceive as a sea of misinformation and noise. This the stock market. Caveat emptor.

    2. Sounds like you’d support a transaction tax, which would provide disincentive to day (nanosecond?) traders. It would turn the stock markets from a high-tech rigged gambling game back into a system for investing in productive businesses.

  4. I wish Apple would increase the dividend. Obviously all those share repurchases haven’t done all that much for the stock. And what is the PE of Amazon? LOL! I can’t find it.

  5. Because everyone was expecting to see the television that Steve Jobs said in one of his last interviews that (he) ‘finally got it right’. Instead we get a dubious-real-world-usage watch, and people smiled politely for two months. Then the stock began to lose value, no surprise. The TV, if it wasn’t thrown on the scrap heap, could save them. Then the car would put them over the trillion dollar market cap…as long isn’t just an ‘Apple dashboard’ in a BMW or something lame like that. If a ring comes out next year, and all the existing iOS gizmos only get bigger…well… face it, the fellas down at the boys club where they swap stocks don’t like Tim. And they’re a vengeful lot, especially if they feel they were robbed of Jobs’ swansong product, the final ‘one last thing’ snatched away… for a watch that can’t even do what Dick Tracy’s watch could do.

    Likely the boys club has also noticed how Microsoft is now branding their own computers…. and how low it’s stick price might be relative to such a momentous event…

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