Why Apple deserves to be worth $2 trillion

Apple is currently worth almost $2 trillion, $1.927 trillion to be exact – or roughly the size of Italy’s gross domestic product. Apple, amid the COVID-19 pandemic, has rallied 55% year to date, after a gain of 85% in 2019. This year’s advance alone has expanded the company’s market value by nearly $700 billion.

Image: Apple Fifth Avenue
Apple Fifth Avenue

Eric J. Savitz for Barron’s:

Apple had $26 billion in phone sales in the June quarter alone, beating estimates thanks to the iPhone SE, a budget-priced iPhone which has been a surprise hit. But the big story is the pending October arrival of the 5G iPhones… Bulls see a “supercycle” with hundreds of millions of upgrades coming.

The pandemic has driven up Mac and iPad sales; the two segments together had $14 billion in June quarter sales. While mostly ignored by investors as a minor side business, together they can do more than $50 billion a year in sales. As a stand-alone, Mac/iPad Corp. would likely be the most valuable U.S. hardware business.

Apple Watch has quietly become an important product, positioned as a sports and wellness device… AirPods have been a sneaky hit, accelerating a shift away from wired earbuds. The next iPhone is expected to ship without the familiar white corded earbuds—both trimming costs and boosting AirPod sales. The wearables segment had June quarter sales of $6.5 billion.

The services business had $13.2 billion of June quarter revenue. Assume annualized revenue in the $50 billion range, and value the company at 10 times sales (comparable to Facebook ), and you get a business worth $500 billion—a top 10 valuation business on its own.

MacDailyNews Take: Apple deserves to be worth considerably more than $2 trillion. The company remains significantly undervalued.

In the full article, Savitz also overs Apple’s cash mountain, limited antitrust risk, the pending 4-for-1 stock split as a statement of confidence, the relationship that Apple CEO has built with President Trump, and more reasons why Apple deserves to be the world’s most valuable company.

6 Comments

  1. Apple is worth whatever investors are willing to pay for it just like Tesla. No matter how well Apple does, there will always be people questioning its value. I kind of understand that. I think some of that has to do with jealousy. I know I think some stocks aren’t worth as much as they are due to jealousy or maybe disbelief of how I didn’t see the value after trying to analyze it. I never saw Tesla being worth as much as it is. I like their cars and they’ve done a great job changing the way people think about electric vehicles. My stupid miss was not realizing they are more than just a car company. I was comparing Tesla to other car companies as transportation and not thinking about the tech behind the Tesla vehicle and the SuperCharger infrastructure. I truly believed that ICE vehicles would be built for another twenty years, but maybe I’m wrong. I thought the oil companies would do everything in their power to stop EVs from becoming popular. Oh, well…

    Apple will become a $2T company sooner than I expected and it blows my mind. I’m so lucky to have purchased Apple back in 2004 and now I’m financially secure thanks to Apple dividends as long as Apple does well. Will Apple ever reach $3T in value? I can’t even imagine that, but I never thought Apple would be worth $1T as my expectations are rather conservative.

    1. Because of extreme unlikelihood of such a pre-split number, it’s time to estimate pre 4-1 split. Ok?

      How’s +$155 ? By when? Per D Ive’s recent estimate, that was up 15% from current, you’re one of the nuts on the bleeding edge at +50%.

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