Apple: What it will take to reach a historic $1 trillion valuation

“Apple is nearing a historic $1 trillion market value following its strong earnings report Tuesday for the June quarter,” Andrew Bary reports for Barron’s. “But its quest to hit that mark is being slowed by its massive stock-buyback program, which is steadily reducing its outstanding shares.”

“Apple shares are up $10.07 to $200.36, a 5.3% gain, in trading Wednesday, putting its market value at $970 billion,” Bary reports. “It had earlier hit a record $201.32. Apple needs to hit a share price of $206.49 to reach the $1 trillion milestone, according to Howard Silverblatt, the senior index analyst at S&P Dow Jones Indices.”

“This price is based on the share count of 4.843 billion on Apple’s balance sheet for June, released Tuesday as part of the earnings release,” Bary reports. “That share count, however, is likely to fall slightly when Apple releases its quarterly 10-Q report, because of the company’s ongoing share-buyback program. It likely will show a share count as of late July. The 10-Q is expected to be issued later today.”

Read more in the full article here.

MacDailyNews Take: It’s a moving target.

And pretty much every stock quote source currently has a different market cap listed for Apple.

SEE ALSO:
Apple could’ve been worth a trillion long ago, but for buybacks and dividends – July 31, 2018

18 Comments

  1. Just out of interest, does anybody know if the cash held counts towards the valuation of Apple, or is the valuation simply the stock price multiplied by the number of shares?

    For most companies, the amount of cash held is fairly modest, but last night Apple reported that it held $129 billion in cash.

    1. The market capitalization of a company is price per share times number of shares outstanding. The amount of cash/securities, debt, etc., is supposedly wrapped into the share price.

      Valuation is a different thing, entirely. Book value, for instance, would take into account all kinds of assets and liabilities, including intangibles such as “goodwill.”

  2. MDN: “Apple could’ve worth [sic] a trillion long ago, but for buybacks and dividends”

    Well, that’s not exactly correct. Were it not for the buybacks, Apple’s earnings/share would not be as high as they are now. If the earnings were not so high, then the stock price would very likely not be as high.

    MDN’s statement above assumes Apple’s stock would have had the same price trajectory as it has without the buybacks. That is highly unlikely.

    Also dividends make the stock more attractive to purchase, thereby increasing its price, without hurting earnings from operations. So, if anything, they assist with the goal of attaining a $1T market cap.

    1. Agreed. It is impossible to say what Apple’s market cap would be right now if the Board had taken a different approach years ago. It might have been higher, it might have been lower, or it might have turned pretty much the same as it did in our timeline.

      It really doesn’t matter anyway. Market cap really does nothing for Apple, in terms of its day-to-day business. In addition, the human fascination with Base-10 round number milestones is also ridiculous. As an investor, the difference between $980B and $1T is $20B, or 2%. As far as I am concerned, it already rounds off to $1T.

    2. I think Apple might have had a chance to break $1T a year or so ago with a cloud computing business acquisition. Apple doesn’t seem to pay any attention to what Wall Street values so highly. It should have been obvious to Apple that companies with cloud computing were very exciting to big investors and they were being touted as easy growth businesses. Apple could have afforded to grab a healthy cloud computing business and make use of it to grow revenue. Of course, I don’t know if it would have been a good fit for Apple. I’m only spinning a possible $1T scenario. I really would have liked to see Apple make a $10B acquisition considering all the acquisitions other tech companies have been making to quickly boost revenue. Apple didn’t have to spend all of its money on just stock buybacks.

      It’s likely Apple will soon reach that elusive $1T mark and past history will be moot.

  3. What’s all this Casino Speak?

    Isn’t market cap a measure of the value of the company? Why would share buyback decrease it, thus making it less valuable?

    Sounds like a bunch of BSBS to me with no real meaning. Just indicators.
    (One of those is b-school btw…, I know it’s hard to tell them apart)

    1. Share buyback doesn’t directly change the value of the company but it does affect the share price. If a companies share price is $100 and there are 10 shares, than the market cap is $1000, 10 shares times $100 share price equals $1000 market cap. If the company buys two shares back than in order to have that same market cap of $1000 a share would have to sell for $125 since now there are only eight shares outstanding. Theoretically the buybacks will increase the value of a share which is why they talk about it as a way of returning money to the shareholder. That’s the mechanics of it. If it’s a good idea or not is another thing altogether.

        1. The MDN comment is misguided. If there were no stock buybacks AND the stock was trading where it is now, they would be a trillion dollar company. But without the buybacks it would be trading at a lower price. If they hadn’t paid a dividend than perhaps the stock price could be higher since the company would have more cash or perhaps the stock price would be lower because investors no longer had income off the stock. There is no way to know. MDN also thinks Tim Cook is an idiot and everything good Apple has ever done was done by Steve Jobs who died 7 years ago. On the date of his death, October 5, 2011, Apple’s market cap was $314.40B, less than 1/3 of what it is today. Somebody clearly is doing something right so don’t put too much faith in what MDN says. They link to some good articles and say really misguided and often incorrect things about them.

        2. Paul is right. Don’t get your information from MDN. This is a fan website with a good helping of haters. You’re not going to learn much useful on this site or in the comments. Five minutes of internet research could have explained what Paul just told you.

            1. What? It is very real money. Please don’t use MDN as your source of information. Do some research into how the stock market works. As I write this Apple has passed the $1 trillion mark. Apple is the first public company that will continue to be worth more than a trillion dollars. I expect the market cap to oscillate in the short term dipping back below $1 trillion but it will steadily climb for years to come. It is quite a milestone whether you are a fan or a hater.

    1. If Apple were to buy back all the shares of their stock they would then be a private company and you could not longer measure their worth based on stock price multiplied by outstanding shares since there would be no outstanding shares. But that doesn’t change the companies worth, directly. Don’t get too hung up on any of this. People like round numbers and think there is some sort of significance to them. There isn’t. Worth is subjective anyway. Someone buys a share because they think the price of a share will go up and for that to happen someone must sell a share because they think it will go down. One of them is right and one of them is wrong. Time will tell.

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