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Apple becomes first U.S. company to reach a $2T market cap
- goalieca 6y agoHoly crap. Feels like just yesterday they hit 1T.
- maps7 6y agoI was actually surprised when I read it because I felt the same way.
- felipellrocha 6y agoYour first T is always the hardest
- beached_whale 6y agoWell, it is about 30 doublings from the first dollar
- deleted 6y ago[deleted]
- Jugurtha 6y agoI believe 30 doublings are about a billion. The poster is referring to a "Trillion".
- deleted 6y ago[deleted]
- fastball 6y agoYep, and that's just 40 doublings. Add 10 doublings to go up 3 orders of magnitude.
- beached_whale 6y agooops, I was even thinking billion when I thought about it. Nice little slip where Trillion and dollars probably don't really mix that often
- nightski 6y agoYeah when you gain 59% in value in a single year during a pandemic that will do it. Bezos net worth has also gone up 80B (to 190B, even after a divorce haha). Musk up 60B while Tesla has a what, 900 PE ratio? Zuck up 20+B. The pandemic has served our tech overlords well.
- portmanteaufu 6y agoThey hit $1T on August 2nd, 2018. https://www.washingtonpost.com/business/economy/apple-is-the-first-1-trillion-company-in-history/2018/08/02/ea3e7a02-9599-11e8-a679-b09212fb69c2_story.html https://www.washingtonpost.com/business/economy/apple-is-the...
- theandrewbailey 6y agoCook's Law: Apple's value will double approximately every 24 months.
- zionic 6y agoIs this a sign of pending hyper inflation?
- supernova87a 6y agoHave you heard of Benford's Law? https://en.wikipedia.org/wiki/Benford%27s_law https://en.wikipedia.org/wiki/Benford%27s_law The first time some natural process hits the first digit = "1" is the hardest, then the next digits are just a power law of frequency from that.
- BbzzbB 6y agoAs the saying goes, the first trillion is the hardest. This year proved to me beyond any doubts that I understand nothing about the markets, the fact the world's largest (publicly traded) company raised 125% in a single year boggles my mind (not even related to the COVID drop).
- sylvain_kerkour 6y agoI believe it's what we call a 'bubble'
- shadowtree 6y agoIt's so interesting how people try to rationalize modern valuations by connecting them to some other metric (P/E, growth, etc.). None of that is true. Stock price presents demand for the stock. Demand is emotional. The stock market represent (rich) people's feelings. I want to own a piece of Apple, because a bunch of others want a piece of Apple. Tesla's stock is exhibit A for this. If there was a direct correlation between some metric and stock price, every trade would be automated.
- gzu 6y agoDon't forget the non-emotional constant demand for Apple shares caused by stock buybacks combined with a 7% weight in the S&P 500. Every new dollar invested in an index tracking ETF/mutual fund needs to buy 7c worth of Apple stock from someone. It's a huge supply/demand problem. At what price will someone forego Apple shares? What happens when Apple is 10%, 15% etc of the S&P 500 index? Where will these shares to sell come from? At this point, why would anyone holding Apple shares outright sell? This demand may only lead to a self reinforcing feedback loop where: a greater market cap (3T?) -> higher index weight (10+%) -> greater buying pressure -> more shares locked up in index funds (not available for sale) -> repeat This is explains why there has been increasingly volatile movements in Apple shares. This lack of share liquidity works both directions: buying and selling. Not enough active investors are available to step in when passive investors (who now make up an enormous portion of capital markets) decide to start selling index tracking funds in bulk.
- naveen99 6y agoShare buy backs raise the share price, but not market cap. so if you have 101 shares of Apple. And Apple buys 1 of those shares back from you, not much has changed as far as who has more value.
- gzu 6y agoSure in a perfect world you decide to sell 1 share to Apple. The share price increases to account to for the lost share and market cap stays same. In reality, enormous swaths of shares are held by index tracking funds and everyday investors who don’t sell their shares into buybacks. In this case the market price based off supply/demand must rise in order to find someone who will let go of a share so Apple can buy it.
- polote 6y agoThe next one will probably be Tesla
- hello_1234 6y agoPerhaps in Aug 19, 2120.
- Octoth0rpe 6y agoI'd expect amazon long before Tesla, given the shift _away_ from driving and _towards_ more online ordering.
- stephanheijl 6y agoThat's a pretty good bet, as Amazon is already sitting on a 1.6T market cap. Tesla is at a "meager" 342B$.
- visarga 6y agoI used to think it's a good idea to ditch cars and use public transport and bikes, but now I don't think I want to ever use public transport again. The personal car is a protection shield against infection, and for that reason I think many people will turn back to them.
- Octoth0rpe 6y agoI don't disagree with your assessment re: infection, but I'd point out that transportation overall is dropping, possibly permanently; and that the long term economic damage from the pandemic and the debt loads that we're taking on will likely hurt auto sales for a long, long time. I'm not sure that whatever shift away from mass transit to private vehicles will make up for the overall loss of transportation, and you have to have a job to go _to_ in order to need a car to get there.
- jzl 6y agoTesla's current valuation has almost nothing to do with its automotive business.
- scott31 6y agoThat is even higher than US military budget. I really don't know which one is a bigger waste of money and effort
- bulletsvshumans 6y agoJust to be clear, those numbers aren't directly comparable. The market cap is the total value of the company, whereas the yearly budget is the cost for a single year.
- natcombs 6y ago>> That is even higher than US military budget. I really don't know which one is a bigger waste of money and effort A budget and market cap are fundamentally two different things, and are incomparable.
- stephanheijl 6y agoThe US military budget is an expenditure that occurs every year. Apple's market cap is the expected value of all of Apple's outstanding shares. These are really not comparable.
- kaycebasques 6y agoIf anything, the comparison drives home how big the US's military is.
- athenot 6y agoEven though it's not exactly new, in my mind this is still in sharp contrast to the recurring headlines I used to read about whether Apple will survive in the next year (mac user since 1990).
- chrisseaton 6y ago> the recurring headlines I used to read about whether Apple will survive in the next year Where are these headlines? That seems like a patently ludicrous thing to claim that Apple will disappear within a year.
- cma 6y agoI think he means headlines from the 90s.
- gdubs 6y agoLook for the Wired magazine cover with the rainbow Apple logo surrounded by a crown of thorns.
- geerlingguy 6y agoI believe the caption was “PRAY”
- athenot 6y agoSorry I should have clarified: all throughout the 90s.
- leesec 6y agoFunny were seeing the same headlines now about Tesla when it is on a similar trajectory.
- mhh__ 6y agoComparing apple to Tesla is a bit rich, no? I don't know where Tesla will end up but I can't see them being the Apple of cars when the traditional manufacturers finish milking the ICE. It's not impossible but probabilistically I can't see how Tesla convert the share price into business. For example, Tesla's market cap is about 15x bigger than Ford's - but Ford's yearly revenue is about half that market cap.
- user5994461 6y agoFor comparison, that's more than the GDP of Italy or Spain.
- stephanheijl 6y agoSomething similar was commented below. These figures are not comparable, as GDP is "collected" every year. Revenue for Apple sits at 260B$, which is closer to the GDP of Vietnam.
- deleted 6y ago[deleted]
- surething123 6y agoComparing income (GDP) vs. assets/market cap isn't really a meaningful comparison, here, as they're fundamentally different things.
- romanoderoma 6y agoSpain, Yes Italy, No
- 6gvONxR4sf7o 6y agoApple’s dollars and Italy or Spain’s dollars per year aren’t the same units. All this means is that neither Italy nor Spain create the equivalent of one new Apple per year. I’m not even sure if that’s accurate, as valuation delta and production might have the same units but still probably aren’t the same thing.
- adventured 6y agoI want to explain why you're being downvoted, why this happens in every HN thread like this (I've been observing it for more than a decade here), and why they're all wrong (every single time). First, you did nothing wrong. You can very easily, very obviously, compare Apple's market cap to the total annual economic output of a nation, or the economic output of any thing over a given amount of time. Apple's market cap of $2 trillion, is greater than the annual economic output of the nation of Italy's 60.3 million people ($1.98t 2019). You just got told that is impossible to do. I just did the impossible. Which do you think is more likely true? It's obvious. It takes the 60.3 million people of Italy a year to produce enough total economic output to almost match the total value of all outstanding Apple shares. Oh shit, I did it again. A spontaneous blackhole may appear and we may all die. I just successfully compared two things everyone repeatedly says is impossible to compare. You can obviously compare the two, and do so quite cleanly, have no fear. I've been watching this herd action for a long time here. People don't seem able to stop and think about the context beyond a primitive twitch action, they just reflexively downvote, and parrot the same responses ad nauseam (it's always the same responses without exception). Second, you have to understand, you're facing off against many people's favorite "gotcha" Smart Person(TM) response. It's an arrow they hold in their bag, for times like this, that helps them feel smarter than you (that's why you'll see so many of the same response, unnecessarily; if they were right, one would be enough). They may not know much about economics or the stock market, however they know this thing, they saw it somewhere else, it sounded true, and they can feel good by downvoting you and by drowning you in one line responses. You deserve better dear user5994461, for your four years of HN dedication and contribution. I want you to know that what you did is perfectly OK.
- deleted 6y ago[deleted]
- dis-sys 6y agoso apple added $1t market cap in just 24 months, did apple actually created $1t value in any way or form to justify that $1t market cap increase?
- mpweiher 6y agoP/E ratio has been pretty consistent and reasonable in the 30s.
- samfisher83 6y agoIts P/E ratio was about 18 year ago. It has pretty much doubled in the last year.
- rmah 6y agoApple made apx $115B in net income over that two year period and paid out around $30B in dividends. So... yeah. In case you're wondering how much $115B is in terms normal people can understand... if that was in $100 paper notes... - Stacked up on top of each other, it would reach 12,000 km high (the ISS orbits at about 400km) - The notes would weigh around 1,150 tons - To ship them, you'd need over 1000 4'x4' shipping pallets, each weighing a ton $115 billion is an absurdly huge amount of profits
- dis-sys 6y agoThe answer is not convincing - with a comparable net income level, the world's largest bank ICBC only has 1/7 of apple's market cap. Vodafone had over 100 billion earnings back in 2014, that was like two years of apple earnings in 12 months, Vodafone never had a 24,000km high market cap built with $100 notes.
- rmah 6y agoFor ICBC, it's a state-owned institution. And a bank. The accounting is special for banks (and mostly beyond me). Some say, it's doubly "special" for companies like ICBC. For Vodafone, that number was a special one time gain from the sale of Verizon Wireless. In 2014, they showed an operating loss of £3.9B (but a overall gain of £11B because of income tax credits -- hoorah for financial engineering?)
- jordache 6y agoThe semiconductor value stream will be huge! W/O that, I've always considered Apple to be one phone competitor's pivot away from being obsolete.
- mistersquid 6y agoThe headline and article specify “U.S.”, but isn’t this true for any company in the world throughout history? Honest question.
- papaf 6y agoIts impressive but colonialism pays better: https://www.businessinsider.de/international/how-todays-tech-giants-compare-to-massive-companies-of-empires-past-2017-12/?r=US&IR=T https://www.businessinsider.de/international/how-todays-tech...
- joshuaissac 6y agoAdjusted for inflation, the Dutch East India Company had a peak market capitalisation of $7.9t. https://www.visualcapitalist.com/most-valuable-companies-all-time/ https://www.visualcapitalist.com/most-valuable-companies-all...
- mistersquid 6y agoThank you for this deconfirming (denying?) example! The Dutch East India Company and, as another commenter mentioned, colonialism give much food for thought.
- lkbm 6y ago"Refuting" works best here. It's mind-boggling to really look at the size and power of colonial trading companies. I've been meaning to re-try reading the Baroque Cycle -- started once, but gave up a ways in.
- zeroonetwothree 6y agoThough prices were much less efficient then so this has much larger error bars. Plus our inflation estimates that far back are very rough.
- em500 6y agoOnly according to fantasy inflation adjustments, see my earlier comment on this: https://news.ycombinator.com/item?id=19622046 https://news.ycombinator.com/item?id=19622046
- wmab 6y agoApple succeeded because they managed to do something that was previously unimaginable in business theory - create a mass-market luxury good. A well taught theory in business school is Porter's general theory, which was to create a sustainable competitive advantage you either competed on differentiation or cost, and if we did something in the middle, you would die. Apple managed to create a luxury product - the iPhone (differentiation) at mass-market scale (low cost base) which has driven the majority of their profitability since it's launch.
- dustingetz 6y ago3k rings, 30k cars, 300k houses, ...?
- namdnay 6y agoI definitely agree with the rings, but you don't buy many in a lifetime. Less so with the cars, the vast majority of cars sold are with relatively thin margins. And houses aren't sold by a single business, it's just the law of supply and demand. I would add Nespresso as an example: They've definitely managed to mass-market a luxury good (outrageously expensive coffee pods)
- deleted 6y ago[deleted]
- 0xEFF 6y agoAll three are below median prices for the coastal US.
- mikx007 6y agoIf you are in Chicago, think 6k rings, 60k cars and 600k houses.
- snarf21 6y agoThis, exactly. The other thing is that everyone and their brother wants to create an app store to get 30% of revenue. The thing they miss is that you have a consumer driven device that users want even without the app store. That is what Apple nailed. They were also first. They will continue to ride this wave for a long time.
- MadSudaca 6y agoThis is certainly an amazing accomplishment for Apple, but let's not forget who else played a big part in this, the FED.
- sharemywin 6y agoDon't forget Robinhood. you can now buy $1 of apple at an infinite market cap!!!
- stephanheijl 6y agoA large contributor to this would be the increase in investors pumping money in "safe" and easy ETFs. Instead of taking the time to investigate the market and looking into novel ventures, people want to ride the market into wealth. If there ever was any social responsibility in investing, it would have been providing fluidity into new ventures and making markets efficient by making educated investments. I find this trend worrisome and I think it might be sending incorrect market signals.
- rogerkirkness 6y agoThe more people buy it, the more value there is in active or truly risky investing. Let them have fake safety, I'll take real antifragility and abundant capital flowing to my business any day.
- Analemma_ 6y ago> If there ever was any social responsibility in investing, it would have been providing fluidity into new ventures and making markets efficient by making educated investments. I If investing in ETFs/index funds is morally blameworthy, which is already questionable, the blame surely lies with active fund managers and their outrageous costs driving people into the arms of low-cost instruments that, net of fees, have had better performance.
- linuxftw 6y agoThe largest driver of asset inflation in the large caps is 401k's and other retirement/pension plans managed by large entities. I have no choice but to invest my money in my 401k into the stock market or equally risky and lower return corporate bond market. Individuals investing in ETFs doesn't move the needle. Fund managers seem to be part of some cartel, pumping various asset groups at various times. We're just along for the ride.
- phkahler 6y ago>> The largest driver of asset inflation in the large caps is 401k's and other retirement/pension plans managed by large entities. Yep. If covid had put 40 million US white collar people on unemployment instead of hourly folks, the market would have crashed hard as the monthly influx of money dropped and some people started pulling money out early to get by.
- jameslk 6y agoIt's not that Apple has grown that much in value, but rather the US dollar has become more worthless. Even gold is up nearly 20% since May.
- nemo44x 6y agoIt's good news as the USD has been very overvalued for awhile. Was under valued 8-10 years ago but would be nice to see it lose some more value, increase USA export competitiveness, and also USA listed companies that report in USD and make a lot of business overseas will see a nice bump in revenues by virtue of exchanging more valuable EUR/GBP/etc into more USD than they have been able to recently.
- fumar 6y agoDo you have a handy dataset tracking US inflation?
- jeffbee 6y agoIt's not inflation as such, but look at the exchange rate between CHF/USD or EUR/USD. USA is a failed state moving forward on momentum. You can expect the currency to crash after Trump refuses to leave office.
- mpweiher 6y ago> EUR/USD. EUR is up against USD for the last 5 years or so, by a fairly small amount (~10% max). It is down against the USD over the last 10 years, by a larger amount (~20%). 10-20% is not much when it comes to currency fluctuations. When we were in the US in the 80s, USD/DEM went from around 1.70 to 3.50, so 2x fluctuation.
- TuringNYC 6y agoInflation is a tricky topic because it all depends on what you measure. Multiple government measures of inflation are almost disingenuous because they don't measure some key items. Inflation is fairly low when it comes to sustenance foods, cars, telecom, and technology -- however, that is not the story for things like: fish, fresh produce, textbooks, healthcare, rent, home prices, executive MBAs, some imported goods. It gets even more complicated. Some things cost one for some people and another for others -- e.g., college tuition has skyrocketed if you don't get a scholarship/aid but is flat or down if you do get scholarship/aid
- typest 6y agoAre the market caps of Apple and other tech giants growing as exponents, or sigmoids? This, to me, is the big question. Can multi-trillion dollar market caps continue to grow at this rate, or will they taper off? Naively, one expects to get returns as a percentage of investment. In this multiplicative sense, Jeff Bezos at a 188B net worth is much closer to being a trillionaire than a one-billionaire (a factor of 5 vs a factor of 188). But can Amazon's market cap continue to grow in such a fashion? What bounds it (and that of other tech companies)? One might assume that they have to be bound by world GDP (80T). But if they're truly creating value, can't they expand world GDP along with themselves?
- pavpanchekha 6y agoGDP is value created per year. Market cap is (a proxy for) value created over the whole future existence of the corporation, at some discount rate. The obvious cap on market cap of a company is total world wealth, which is on the order of few hundred trillion.
- typest 6y agoThanks, yeah, I felt a little uneasy with the comparison. I figure this means market cap should be a bounded function of GDP, yeah?
- pavpanchekha 6y agoYou're basically asking how to convert assets (market cap) to income (GDP). But there isn't a fixed conversion: it depends on your discount rate (how valuable is future money compared to current money) which itself you can loosely think of as related to interest rates, which themselves change over time. Alternatively, think of the P/E ratio, which also changes over time. There's no bound. If you think humanity will exist forever, and you're willing to wait forever, and you think Apple will continue selling iPhones at a large profit forever, its value is effectively infinite.
- nthj 6y agoThis statement seems to assume wealth is a fixed constant, which it isn’t. Theoretically if it was believed a company will create a thousand trillion in wealth it could be valued against that. http://www.paulgraham.com/wealth.html http://www.paulgraham.com/wealth.html
- api 6y agoThis, or at least the breakout that led to this, has been achieved on the strength of product and user experience. Apple's tech isn't really much better than its rivals, except in a few areas like inputs and haptics. Its high performance ARM cores are impressive but there are other impressive ARM cores and it's a very recent development anyway. Until a few years ago they were "good enough for a phone" but not rivals of Intel or AMD for anything serious. In fact I seem to remember Qualcomm Snapdragon chips being better on some metrics a couple years ago. The thing that made Apple really stand out was the polish and attention to detail in its product. This has two parts. One is the product being good. The other is the striking absence of tacked-on crap features and shitware. I recently switched to an iPhone from Android due to privacy issues and the thing that immediately struck me about the iPhone was the lack of shitware preloaded on the device. It did not come preloaded with Google Spy... err... Play Services or Facebook, let alone a bunch of Samsung and carrier apps that are surely encrusted with spyware. I can even uninstall most Apple apps that I don't want! Same goes for the Mac. A new Mac does not show you ads. Its equivalent of the start menu isn't full of loot box games and other shitware of the sort found on Windows or Android tablet or "laplet" (or is it "tabtop?") devices. On the Mac I can uninstall pretty much anything except system apps (well you could but that might be problematic). You can even uninstall Safari and replace it wholly with Firefox or Chrome AFAIK. Going way, way back, when I first tried an early 'oughts Mac I was struck by the lack of the worthless but prominent "Thinkvantage" button found on my Thinkpad or any other obvious committee tack-ons. The design was clean. This same lack of shit is what made the original Google break out way back in the early 'oughts. Back then most search engine web sites looked like the home pages of online casinos. Google had a blank and a button that said "search." The instant I saw it, I never again returned to another search engine. Apple has occasionally gone too far with "clean" or "thin and light," but if you are going to err I'd err on that side. Erring on the side of cruft and shitware is much worse. Take note people.
- vmception 6y agoMy personal metric is seeing these publicly traded non-state enterprises catch up to Saudi Aramco! The American engine is producing awesome results, still a long way to go! Saudi Aramco 2018 net income was $110 billion Saudi Aramco 2019 net income was $88 billion Apple 2018 net income was $59 billion Apple 2019 net income was $55 billion Then I will be really impressed! It is more likely to be an inflection point as incumbent oil producers fail to diversify and revenues go down. But I'll accept either result.
- fermienrico 6y ago> My personal metric is seeing these publicly traded non-state enterprises catch up to Saudi Aramco! Why is this a good metric?
- NikolaNovak 6y agoNot the OP, but I think it's an "Interesting" Metric (which is a more easily defensible/explainable term), rather than necessarily a "good metric" (which we'd get bogged down defining because it assumes a specific goal which people are less likely to share).
- reaperducer 6y agoMaybe because it shows that people value the product more than they value the stock. Aramco's value increases by convincing people to buy more of its product. Apple's value increases by selling more products, but also from its stock value going up. That second part is important because it could be hype or a bubble or something else. But with Aramco, you know it's all about a tangible product. My wife has another measurement that she uses. She increased her Apple holdings when the pandemic started purely because of Apple's cash. Her logic is that with all that money to burn, it has a better chance than most of surviving this crisis.
- vmception 6y agoIts a better metric than marketcap. Marketcap is just what a few people are willing to pay for shares, literally the one person at the auction house that bid higher than others and got SOLD to, except in the stock market everyone pretends to multiple that 1 share by the other 4.28billion and act like its an indicator of value. Whereas net income shows what MANY people bought, and how the company is able to keep a bunch leftover. And regarding "good", it's a good metric for value creation and the infrastructure for independence, as this has been unachievable before and always required a monopoly on power derived from the entire social contract of society and force. So it is merely interesting for it to occur in the absence of those things. It is not a comment on "good" in terms of society and whether the social contract should include a way to limit them, it doesn't factor that in at all.
- samfisher83 6y agoIf we are doing discounted cash flow analysis, apple made about 70 billion in free cash flow. From the balance sheet balance sheet they have about 100 billion in tangible assets. So if we take 1900/x=70 years which would imply a rate of 4% which is reasonable. However how many companies have been on top for 30 years? The whole market seems insanely overvalued during a pandemic. The entire stock market cap is 1.6x gdp. which is greater than the .com crash. This is one of the things buffet talks about. https://www.advisorperspectives.com/dshort/updates/2020/08/04/market-cap-to-gdp-an-updated-look-at-the-buffett-valuation-indicator https://www.advisorperspectives.com/dshort/updates/2020/08/0...
- pfortuny 6y agoYes. But during the .com crash, rates were "real" (not like today, when they are just technically greater than 0).
- victor106 6y ago> So if we take 1900/x=70 years which would imply a rate of 4% which is reasonable. How did you get to 4% from the above calculation?
- 317070 6y ago(2000B value - 100B assets) / (70B cashflow) = 27 years investment payback. At this point I think he did 100/27 years=4% interest rate per year. However, that would be for the simple interest case, i.e. not taking into account compounding. However, for the cumulative interest rate, you would normally do ln(2)*100/27 years = 70/27 or a 2.7% YoY interest rate. As a general trick: if you want to convert payback time to cumulative interest rate, use 70 instead of 100. There was a TED talk on the topic iirc.
- drocer88 6y ago"... how many companies have been on top for 30 years?" Looks like General Motors and AT&T were top 2 from 1930 to 1960: https://taaginc.com/large-and-in-charge/ https://taaginc.com/large-and-in-charge/
- cblconfederate 6y agoIs this the US stimulus package finding its way to the pockets of shareholders?
- adventured 6y agoNo, it's mostly multiple expansion. You'll see a lot of responses across other threads claiming it's due to the low interest rate environment (the justification). That plays a role, sure. Interest rates have commonly been near zero for the better part of the past decade though. So why was Apple's PE ratio ~11-13 previously while interest rates were very low (0% or sub 1%) with a quasi normal economy, and now its PE ratio is more like 30-35 during a crushing pandemic recessionary environment while interest rates are zero? Apple's operating income for the past four quarters is not considerably higher than it was in fiscal 2016, so why is the stock three to four times higher? Surely their growth rate must be extreme right now, to justify that radical increase (answer: nope). What must the future growth expectations be to justify a 300% stock increase; that Apple's enormous profit will double soon? (nope, it's not gonna happen) It has more to do with a stock market mania that has taken over, than it has to do with interest rates, at this point. The interest rate explanation maybe gets you to second base, the rest of it is mania. You see that represented in the ever expanding dotcom bubble style extreme valuations that are increasingly common (SHOP, TSLA, NVDA, AMD, DOCU, etc). NVDA's context for example will remind of CSCO in 1999-2000 (except NVDA is growing slower today than CSCO was then). You'll see it in the pop-celebrity status of people like Dave Portnoy (who suddenly decided to become a trader with little experience). Whereas such extreme valuations were not so common three to eight years ago (circa 2012-2017), while we had a quasi normal economic situation and 0% rates (or otherwise near 1% or lower) as well. All that said, nobody should ever doubt how far a mania can go in regards to pushing valuations toward the moon.
- tfehring 6y agoI think you're understating the impact of discount rates here. Long term interest rates are down ~70 bps from their previous all-time low in 2016 and something like 130 bps from their average over the period you're describing. That's a huge change, especially if you expect Apple's profits to come in over a long duration. There's probably been a shift in investor preference in favor of equities too (which means decreases in interest rates are smaller than the decrease in discount rates used for investors' DCF valuation of equities), but I think "mania" is far too strong a word. I think of it more as a result of investors shifting to riskier assets as returns to capital decline in general, in part due to leverage aversion. I mean, how else are you supposed to deploy your capital? Buy the junk bonds that are currently being issued at yields below 3%?
- sidcool 6y agoIs it the first US company or the first company ever?
- angio 6y agoSaudi Aramco hit 2.1T in December of last year.
- woranl 6y agoBack in 1997, Michael Dell famously said that if he were put in charge of Apple, "I'd shut it down and give the money back to the shareholders." Good that Apple didn’t hire you then. Where is Dell now?
- theandrewbailey 6y agoCEO of Dell Technologies, just like he was then.
- woranl 6y agoJust as relevant as ever.
- boring_twenties 6y agoDell is not exactly irrelevant, they are basically tied for first place in servers with HPE.
- tempsy 6y agotheir Q2 sales were better than a low expectation but in line with other non-holiday quarter, but bread and butter iPhone sales have been very flat for a long time. investors are essentially thinking “if Apple can do the same in Q2 as other quarters pre-crisis then it must mean it will do incredibly once this is over” If you want to invest at these levels you should probably find out what happened in Q2 - I wouldn’t be surprised if it was a mix of stimulus money and need for lower end macs and iPads for video conferencing in the immediate term due to stay at home that won’t necessarily translate to permanently accelerated growth in future quarters.
- sek 6y agoIsn't Apple in a pretty mature market, they have to double their earnings in the next few years to justify this p/e ratio. Is that realistic?
- riffraff 6y agothey are still expanding their offer, with Apple+ and whatever Apple-not-quite-prime will be coming. Also, Apple Silicon might be the beginning of something. They're still overpriced, but I wouldn't look at them as having exhausted their potential increase in revenue/profits.
- humanlion87 6y agoI don't think metrics like P/E ratio are as useful as before any longer when analyzing companies like this. The FED printing money and lack of other investments in this zero-interest rate economy has a significant role in raising stock/asset prices.
- scarface74 6y agoThere are two ways to make money off a stock - either Apple can keep growing or issue dividends.
- no_wizard 6y agoI think Apple sees one of its biggest moats as the App Store, and I believe rightly so. I really think that’s where a large portion of their stringent rules are coming from is protecting that moat. I wouldn’t be surprised though if they actually experienced more growth overall by focusing more on the developer experience, loosening some of their restrictions on payments (to me it should be a blessed API for other payment processors. Sure require they accept Apple Pay. That’s fine. But I do think that’s the way forward) and allow app developers to sell upgrades rather than just subscriptions, one time purchases, and in app purchases. I think it could really reignite the marketplace on their devices
- cblconfederate 6y agoIs the app store really valuable ? How often do we read about app store devs becoming millionaires (they don't). Users spend 97% of their time in the top 10 (free) apps from the usual suspects. App development is a dead end business. Apple is a premium products company and software was (and will be) always cheap so there s no way they will make their usual profit margins on that. They need to keep selling premium stuff, which has to be physical. At best they can add some premium content , but that's it.
- likpok 6y agoThere are thousands or tens of thousands of millionaires produced by those top 10 free apps.
- treis 6y agoIn app purchases are a huge market. This site puts it at $50 billion a year in the US alone: https://techcrunch.com/2020/01/15/app-stores-saw-record-204-billion-app-downloads-in-2019-consumer-spend-of-120-billion/ https://techcrunch.com/2020/01/15/app-stores-saw-record-204-... It's a huge market and Apple takes a 30% cut of that for not doing too much. The margins have to be bonkers.
- deleted 6y ago[deleted]
- paxys 6y agoA recession is the perfect opportunity for the rich to get richer.
- cuspycode 6y agoDo you have any practical suggestions for how to accomplish that? I'm not rich, but I'm thinking that anything a billionaire can do with $1 billion can also be done by ten thousand households who have $100k each. So the middle class could perhaps get richer if they only knew the secret?
- paxys 6y agoThe problem is really (1) having money lying around that you can afford to "play around" with without, say, putting your retirement or mortgage in jeopardy, and (2) having professional advice from people who know what the hell is going on (including borderline or overt insider info). A hedge fund, for example, isn't going to touch someone wanting to invest $100K.
- adaisadais 6y ago“The slow one now will later be fast cause the times they are a changing” -Bob Dylan It is apparent that Apple has been successful financially and has reached new heights but I don’t think this can continue for much longer. We are hanging on longer and longer to the iPhone and the services (namely Apple Music when compared to Spotify) Apple offers are less exciting than their competition. AirPods have become and ubiquitous sign of the technological times where people buy on brand and not on quality or functionality (plus they’re ugly imo). Where does Apple go from here? They can’t keep making iPhones and pissing developers off forever. They must either rise to a new zenith from a pure business standpoint (new products, cannibalize the old) or in several years time people will begin really thinking critically and realizing that while the Apple brand is “superior” that the technology is not. I tell you all this typing on my iPhone X... I’ve owned iPhones since 2010. But they times are a changing.
- scarface74 6y agoIt is apparent that Apple has been successful financially and has reached new heights but I don’t think this can continue for much longer. People have been declaring the death of Apple since the mid 80s. I was around then with my Apple //e. We are hanging on longer and longer to the iPhone and the services (namely Apple Music when compared to Spotify Yet and still Apple Music is growing faster than Spotify, service revenue is growing like crazy, and Apple doesn’t have to spend a hundred millions of dollars to get one person on their platform (Joe Rogan) Where does Apple go from here? They can’t keep making iPhones and pissing developers off forever. Developers really overstate their role. Developers go where the money is. Most of the money from the App Store comes from loot boxes and whales buying virtual currency. Developers have been jumping through larger hoops for over 4 decades developing for consoles. I’m sure people asked where does Apple go from here since they introduced the Apple // in 40 years. Apple has shown an ability to evolve. AirPods have become and ubiquitous sign of the technological times where people buy on brand and not on quality or functionality (plus they’re ugly imo). People have been accusing Apple to sell on brand for two decades. Now, but especially when iOS 14 comes out, the integration between AirPods, iPads, iPhones, Apple Watch and to a lesser extent the AppleTV is second to none. Yeah, I have all of them.... Maybe you don’t have the pulse on what the consumer wants? I’ve seen analysts who believe that the AirPods by themselves are larger in terms of revenue than the iPod was at its peak. They must either rise to a new zenith from a pure business standpoint (new products, cannibalize the old) Has Apple ever shown an unwillingness to cannibalize it’s own products? Microsoft for instance has been one of the five most valuable companies for 20 years. This is not rah rah Apple. The only one of the five big tech companies that have shown an ability to evolve and diversify over the past 10-15 years is Google.
- VoxPelli 6y agoThese records sure doesn’t play in their favor when it comes to investigations of being harmful to the competitive environment. One could ask the questions: Should any single (non-state?) entity be this large? Is it overall better to have innovation and production concentrated like this or would society benefit from increased plurality? I don’t know, but numbers like these sure makes me wonder
- zeroonetwothree 6y agoShould any state entity be this large?
- joubert 6y ago> Should any single (non-state?) entity be this large? I interpreted this as “should any non-state entity” have more power than the state? My initial thoughts are that if the particular state in question is a working, liberal democracy apparatus, then it is probably best that it has more power than a non-elected, non-representative entity (whether or not said entity is for-profit, like a corporation, or non-profit, such as a church).
- VoxPelli 6y agoStates are what states are, it’s more complicated when it comes to sizes there as it has to do with territory, democracy etc. So I didn’t try to relate companies to states, I just wanted to exclude the states from the discussion altogether.
- joubert 6y agoYep. That’s why I replied because the parent comment (to my comment) doesn’t appear to me to advance the conversation.
- scarface74 6y agoIt’s not like a powerful state is harmless. Ask all of the countries where the US tried to “bring Democracy”.
- fallingfrog 6y agoIt’s a bubble. Just remember, the investor is the customer and the stock price is the product.
- serjester 6y agoP/E ratio of almost 40? Seems crazy to value the largest tech company in the world at a price where you wouldn't see your money back for 40 years. Do they really have enough room to grow to offset that? Seems unlikely to me, but then again you don't see me shorting it :)
- c1b 6y agoYou're thinking about this wrong. P/E 40 is comparable to an interest rate of 2%. Would you rather take 0% from bonds?
- sudosysgen 6y agoOnly if you expect that the company can survive 30 years at the current level.
- cryptica 6y agoP/E ratio is irrelevant these days, they can just do buybacks. Then they never need to pay dividends. If people want to cash out, they can just sell their shares back to Apple. It's more tax efficient too (capital gains instead of income tax). This can work even if earnings were 0.
- fortran77 6y agoMicrosoft isn't too far behind. They were ahead of Apple last year.
- ctdonath 6y agoHow do y’all mentally process that fact? Why does the stock market think the company is “worth” that? My rationalizations: Profits are ~$88B/yr. would take ~22 years to total $2T, sooner with growth. ...but shareholders don’t receive that whole profit, so why own? Apple has room for growth, up to 2x in mobile and 5x in computers (assuming static market), making a cap of $8T look feasible. Thoughts?
- mxschumacher 6y agoin addition to margins and growth, their cash position and the very low interest rates play a role, Apple just borrowed $5.5bn over 40 years for 2.55%: https://www.barrons.com/articles/apple-is-the-latest-to-tap-bond-markets-in-a-record-setting-week-51597344992 https://www.barrons.com/articles/apple-is-the-latest-to-tap-...
- paxys 6y agoThe only real reason to own a stock is so you can sell it to someone else for a higher price in the future.
- catmcgee 6y agoThe fact that only 5 major companies have increased in value since COVID is terrifying.
- joubert 6y agoThis is an illuminating list of 100 companies doing well during the pandemic. https://www.ft.com/content/844ed28c-8074-4856-bde0-20f3bf4cd8f0 https://www.ft.com/content/844ed28c-8074-4856-bde0-20f3bf4cd...
- magedqwani 6y agothe dot-com bubble again 2021
- GeekyBear 6y agoA comparison of the current share price relative to the per-share earnings (PE ratio) for various tech companies. (Numbers pulled from Google Search)* Facebook PE ratio: 32.50, Apple PE ratio: 35.48, Amazon PE ratio: 126.70, Netflix PE ratio: 82.61, Google PE ratio: 34.46 At least within FAANG, Apple's share valuation is still quite reasonable when compared to income. A couple of others. Microsoft PE ratio: 36.80, Tesla PE ratio: 984.47 *I've edited the post to source all numbers from Yahoo Finance.
- safog 6y agoNot sure where you're getting your numbers from but AAPL P/E is 35.46 today. https://finance.yahoo.com/quote/AAPL/ https://finance.yahoo.com/quote/AAPL/
- GeekyBear 6y ago>Not sure where you're getting your numbers from Google's info cards. I'll have to just pull them all from Yahoo and edit the original, I guess.
- jzl 6y agoApple's PE right this moment is 35.13
- tzm 6y agoIt took Apple 37 years to reach $1 trillion market cap and 2 years to reach $2 trillion. What happened? Keep in mind, in 2020 more than $6 trillion has been committed to economic stimulus (Congress + Federal Reserve). Along with 0% federal funds rate, you get liquidity that boosts the market overall.
- scarface74 6y agoApple was a niche computer maker. But also don’t forget that until 1992-1993, Apple was more valuable than MS and most of the then major computer sellers besides HP. Apple and HP were going back and forth as the largest seller of PCs back then. This was Apple’s first foray into the wide consumer market with Macs. Then Windows 95, Apple’s bad decision when it came to clones, and the Performance line happened. Apple wasn’t “beleaguered” when it made the PPC transition between 1994-1995. Lastly, computers weren’t a big deal back then. When I was in college, most of the students didn’t have computers at home.
- FartyMcFarter 6y agoI'm not an Apple hardware guy. I hear a lot of people complaining about their recent laptops, which makes me wonder if they're losing their edge.
- biztos 6y agoI'm one of those people, I thought my fancy new 16" MBP would make up for my previous-gen lousy 13" but oooooh was I wrong. However, they would probably have to do even worse to get me to switch away from their laptops altogether. First, because a few generations ago they were so good I still (irrationally?) hope they'll get back on track, especially with ARM. Second, because I have a hard time believing anyone else's high-end laptops are, on balance, any better. Third, because I'm all-in on iPhone/iPad and think I would miss the integration. Fourth, because for work I need to use software that's only available on Windows or Mac, and I haven't seen anything to convince me that Windows would be better. Finally, I plan to learn Xcode, which will lock me in permanently, but I realize that's my own fault. :-) I don't know if these reasons are typical, but I suspect they are at least a subset of the ten or so most common motivations for us complainers to stick it out. Can't wait to get rid of this 16" MBP though! Grumble...
- FartyMcFarter 6y ago> Second, because I have a hard time believing anyone else's high-end laptops are, on balance, any better. The X1 carbon is pretty great, but I can't compare.
- biztos 6y agoNoted, thanks.
- nonfamous 6y ago233 comments in this thread as of this writing. Not a single mention of the word "taxes".
- zackmorris 6y agoWhat does everyone think about the idea of market cap providing UBI? I've been following AAPL since it was about $12 (as I recall) after the dot bomb: https://finance.yahoo.com/quote/AAPL/chart?p=AAPL https://finance.yahoo.com/quote/AAPL/chart?p=AAPL If I scroll way out, I can see that low corresponds to about 1.04 on 12/10/2000. It's current high as of 8/19/2020 is 466.60, so that's roughly a 450 times return on investment in the time I've been paying attention. Had I invested $1000, I'd have $450,000 today. I could have retired on a cool $4.5 million had I invested $10,000. The problem is, I had no disposable income at that time, having just graduated with about $25,000 in student loans. I only paid them off at the age of 40, almost 20 years later. I spent 6 years of that working extremely hard moving furniture and working in a Mac repair shop for 3 years each. The other 14 years were divided between good high-paying jobs like 1 year at hp as a contractor, and many as an entrepreneur attending the school of hard knocks. I had to settle many debts along the way. I learned a bit, but for the most part consider the last 20 years to be 2 lost decades. I feel that applies to all of Gen X, Millennials and younger, but that's still up for debate. Now, we hear that there is no money for UBI from the government. But that doesn't really sound right to me. My feeling is that we actually have 2 economies in the US now. One for the working poor (the bottom half of the US population, ~200 million people who have no net worth and no savings), and one for the capitalists who have any money at all to invest and ride the waves of prosperity. The real heart of what I'm asking is whether other qualities in life like potential, enthusiasm, work ethic, etc should be equivalent/convertible to capital. What is it about me and my life choices that excluded me from enjoying the gains that many readers on here enjoy? Was it my choice to attend college? To be an entrepreneur? To choose computers instead of say, sales? What was it? And when we answer that, we get to the $64,000 question, which is: A) Is there any way to structure our economy so that the whole population could have $1000 to invest early on? Or B) is that a fallacy, would the $1000 just create inflation, a leveling out of everyone's wealth so that Apple's market cap of $2 trillion wouldn't represent anything especially high per capita? If the answer is A), then why didn't we do that? Why don't we do it now? Why couldn't the returns of the stock market provide UBI? If the answer is B), then why are we excited about this? How is this different from rubbing the bottom half of the country's faces in the elite's prosperity?
- dnprock 6y agoSchools are closed. We have a sky high unemployment rate. A raging pandemic across the world with no end in sight. We want things to be normal. The Fed is doing its best at pumping money to keep the market afloat. So we have some weird things in the market like Apple reaching 2T within 3 years, Tesla going 5x within a year. These things are normal given actions from central banks. The market is rational. We're not rational for wanting things to be normal.
- monadic2 6y agoWe really, really need anti-trust action. No other state other than the american one can effectively do this....
- smattiso 6y agoI'm buying long dated puts on Apple personally. Here is my investment thesis: In a nutshell my belief is that Apple will have a few quarters of declining revenue and that is going to torpedo their market cap. * Apple is 100% reliant on selling new hardware, whatever push into subscriptions they are trying to do is going to fail or take ages to catch on. The reason for this is that Apple sells primarily to consumers, so the subscription needs to be a consumer subscription. What could that be? $30 a month for Apple Music + Apple TV + Apple Fitness + Apple Photo Storage? I suppose this is possible but I don't see people switching away from Netflix, HBO, or Spotify so easily. Spotify is likely the most at risk. This strategy is possible but I think the timeframe is going to take longer than people expect. * We are close to reaching the end of phone innovation. The things on the horizon that could possibly drive continued revenue are: smaller iPhones, folding iPhones, planned obsolescence, and from the software side a merge of iOS/iPad OS such that you can use your iPhone 15sMAX-SE with a USB-c monitor as your computer. This is possible but say in 2021 apple releases a 4" folding to 8" iPhone with USB-C out to an external monitor that would fly off the shelves. However that is basically the logical end-point of smartphones and after that Apple is going to have a hard time selling anything new until AR glasses arrive. In a nutshell Apple needs a subscription model to sustain this valuation, and without obsolescence essentially being a forced subscription (you rent your 1000 iphone for 4 years and then chuck it as worthless) I'm not sure they will find success. The planned obsolescence thing is a real revenue driver for Apple though and without some antitrust lawsuit maybe they can maintain that for a long time. My bet is that 2 quarters from now they miss earnings and the valuation blows up.
- shamino 6y agoPeople have been saying these kinds things about Apple forever. Betting against a $2 Trillion company, not sure about that.
- safog 6y agoMarkets can remain irrational longer than you can remain solvent :) Imagine we're in '98 - you won't be right until '01. That's some super long dated puts. Easier to BTFD.
- chourobin 6y ago
- DINKDINK 6y agoSound similar to our current situation? “[...]her position was alarmingly worse, the financial situation beyond her understanding. The krone, at 25 Swiss centimes the previous Christmas, was now quoted at one-twelfth of a centime. Her shares, however, were going up. Gambling on the stock exchange had become the fashion — the only way to avoid losing all one's money and perhaps to add to it. Many new bankers were giving people advice, the flight from the krone governing all transactions. 'Meanwhile,' Frau Eisenmenger wrote, the large numbers of unemployed, their passions fermented by the Communists, are seething with discontent … a mob has attempted to set the Parliament building on fire. Mounted policemen were torn from their horses, which were slaughtered in the Ringstrasse and the warm bleeding flesh dragged away by the crowd … the rioters clamoured for bread and work … Side by side with unprecedented want among the bulk of the population, there is a striking display of luxury among those who are benefitting from the inflation. New nightclubs are being opened.” [...] “Speculation on the stock exchange has spread to all ranks of the population and shares rise like air balloons to limitless heights … My banker congratulates me on every new rise, but he does not dispel the secret uneasiness which my growing wealth arouses in me … it already amounts to millions.” [...] “It was significant enough that union, demands were still for higher wages to meet rising prices rather than, before all else, stable prices and a stable currency. A few of the financially sophisticated could be heard blaming the government, and the Finance Minister in particular, but a typical view was that prices went up because the foreign exchange went up, that the exchange rate went up because of speculation on the Stock Exchange, and that this was obviously the fault of the Jews. Although the price of the dollar was a matter for almost universal discussion, it still appeared to most Germans that the dollar was going up, not that the mark was falling; that the price of food and clothing was being forcibly increased daily, not that the value of money was permanently sinking as the flood of paper marks diluted the purchasing power of the number already in circulation.” [...] “Erna von Pustau recalled the same trend in Hamburg, where 'stock exchange' and 'Jews' were ideas very much connected in the minds of the people, and where the circumstances of a situation which no one really understood made those who had lost their savings or their fortunes ready prey for anti-Semitic propaganda. Her father began to speak against the Jews more and more, asserting now that 'creative capital is the capital we Germans have: parasitical capital is the capital of the Jews.” FERGUSSON, Adam - When Money Dies: The Nightmare of Deficit Spending, Devaluation, and Hyperinflation in Weimar Germany (1975)