“A million dollars isn’t cool. You know what’s cool? A
billion trillion dollars.”
If there’s one company that will hit a trillion dollar market cap, it will be Apple, according to USA Today. Apple could do it in the next three years. USA Today came up with Apple’s trillion dollar market cap based on its five-year geometric mean average increase of 59% a year. So given today’s market value of about $310bn, if Apple continues to increase in value by 59% each year, in 2014, we’ll have the first trillion dollar company. How huge is that? The most valuable company ever was Microsoft in 2000. That year it hit a $604 billion market cap.
So, could Apple beat Microsoft’s value in its best year by more than 65%? My money is on Apple (and has been since November of 2002 when I started buying the stock). The way I look at it is that Apple has its hands in three primary markets: computers, smart phones, and tablets. The first market is fairly maxed out — there’s not a lot of room for the market as a whole to grow — but since Apple only has around 10% of that market, they still have lots of space to grow in it. The inverse is true for smart phones and tablets. Apple is a key player in both those markets, but each of those markets still have decades of growth in front of them, which means that even if Apple doesn’t hold a lead spot, it still has tremendous room for the growth of its products in those markets.
But hey, I’m just a blogger. I don’t have a degree in finance or economics. Though I’m sure you’ll find many analysts who agree with me, there are probably plenty who won’t. Like Arne Alsin of The Street. In October 2001, just four days after the iPod was unveiled, he wrote an article titled “Apple’s Scraping the Bottom of the Barrel” in which he told everyone this: “Don’t buy Apple’s stock. And if you own it, sell it. I know the company has a core following that is loyal, even cultlike, but the broader base of believers has been steadily eroding for years. To wager on this company is to bet that the exodus of users can be staunched and then, implausibly, reversed. It’s hard to imagine such a scenario, given Apple’s shrinking girth. With less than 5% of the market, the company is no longer an afterthought in PCs — it’s irrelevant.”
In his article Alsin went on to say that Apple’s business model was “terminally flawed,” that Apple’s choice of opening retail stores was a sign that it was “desperation time in Cupertino,” and that Apple’s shiny products couldn’t save the company. He finished by saying, “Apple’s story now is fodder for business historians — don’t make it fodder for your portfolio.”
Whoops. Apple is up 3,533% since Alsin wrote that. Big whoops.
My point in bringing up Alsin’s horribly bad advice isn’t to embarrass him or make me look like some kind of investment whiz, it’s to say that some people will scoff at the idea of Apple hitting a trillion dollar market cap — just like some people would scoff that the iPod and retail stores would turn Apple around and make it one of the most valuable companies on the planet. It always seems impossible until it happens. For Apple, I believe it will happen. As USA Today points out, even if Apple only has a 29% return year over year, it will only take them six years to hit a trillion dollar market cap. Even if Steve Jobs leaves the company for good, it’s in great hands and will be a market leader in the years to come. Apple’s products are shiny and cool — and people are buying them by the truckloads — and that means that it isn’t a question of if Apple will hit a trillion dollars, it’s when.
Disclaimer: The author holds a position in AAPL. iPhoneMY does not provide investment advice; consult an expert before buying or selling equities.