How Apple’s Market Value Doubled Within Two Years?

Apple's Market Value

Apple became the first company of America to reach 2 trillion USD in market value. Now it is the second company in the world with highest market capitalization following Saudi Aramco. The iPhone manufacturer reached this milestone after closing the stock market at 462.83 USD per share yesterday (19th August). Its outstanding shares were around 4.2 billion so Apple’s market value went up to 1.98 trillion USD (462.83 x 4.2 billion).

During the trade, the shares briefly crossed the threshold of $477.67 USD which took its total market capitalization to 2 trillion+. This development is symbolic because the company took 42 years to reach first trillion in 2018 but netted another trillion within 2 years because of stock market fluctuation.

The Rise of Apple’s Market Value Amidst the Pandemic

It’s even more surprising that all of Apple’s second trillion was generated in the last three months. The tech giant reported blistering results for the third quarter. According to its financial statements, the revenue from its products and services in each geographical segment went up 11% and its earning per share increased by 18%. All of this happened while entire industries fell victim to coronavirus pandemic one after another. Airline companies suffered the worst damage.

Apple seemingly thrived under the pandemic as its share value grew more than 50% this year. During the month of March, the company was having a difficult time as the stock market plunged over the fears of COVID-19. Then nationwide lockdown in the US caused Apple’s retail stores to close down. The company issued a revenue warning and withdrew its guidance due to the fears of coronavirus. Initially it faced a slower recovery but shot up as soon as the month of June began.

Breakdown of Revenue

It reported 59.7 billion USD revenue for the third quarter at the end of July. Breaking down the revenue; 26.42 billion USD came from iPhone sales, 6.58 billion from iPads, 7.08 from Mac PCs, and 6.45 billion USD from other products while remaining 13.17 billion USD was due to Apple’s services business which blossomed under the pandemic. Following pie chart graphically explains the contribution of Apple’s products and services in its revenue for the quarter.

The Role of Apple’s Services Segment

Wall Street predicted that Apple would be the first to cross $2 trillion marks when it surpassed Saudi Aramco as the world’s most publically traded company in July. Investors were long considering Apple as a full-on software giant rather than just a hardware manufacturer. The most prominent growth of Apple’s market value was due to its services that include App Store, iTunes, iCloud, Apple Music, Apple TV, and many more. The growing work-from-home trend during the lockdown and increased online sales boosted the overall business of Apple. There was 14.85% YoY growth in the sales of Apple services. The key service is the obvious App Store. Reportedly, Apple refused to waive off a 30% App Store tax on online events despite the stress from Facebook.

Critics Highlight Factors Other than Segmentation

The tech giant is frequently criticized for bailing on corporation tax which also have an impact on the final cash-in-hand at the end of the day. Moreover, the power vested in the App Store of Apple was quite visible when it delisted the Fortnite game. The developer, Epic Games sued Apple for violating antitrust laws and enforcing its own payment methods. Critics of tech giants have warned the public about how these big corporations brandish their power which could be higher than a government someday. By looking at the numbers, it is estimated that if more tech giants perform like Apple, then the economy can become more concentrated and consolidated after the crises.

Critics have also argued about the stock buybacks of Apple which have become more than 360 billion USD since 2012. It is more than any other company in the world. US President Trump’s 2017 Tax Cuts and Job Act supports Apple in terms of increased buybacks. According to a research group, that law saved 43 billion USD in tax while Apple carried on its operations smoothly. Reportedly the company repurchases its stock through cash and bonds which currently stands at 194 billion USD.

Despite the sale of products and services, this corporate politics also contributed in Apple’s lucrative quarter. The share price is increased dramatically when a company buys the stock it issued itself. However it reduces the number of total stock available for sale which ultimately causes inequality. It only increases the wealth of company executives and shareholders who are already rich.

The Change Was Much Needed

Tim Cook was largely credited for his leadership in turning the wheel of fortune for Apple during the pandemic. His focus on the expansion of services worked. Five years ago, investors were worried about Apple’s business regarding iPhone and iPads because it traded poorly in the stock market. Two years ago, the tech giant faced another decline in their sales because users became less interested in buying iPhones.

Apple was no longer innovative due to the identical and tiresome designs of each of its iPhone models. So it needed a change desperately which resulted in the introduction of two huge subscription services in 2019; Apple TV and Apple News. Last year, its services generated a record of 12.5 billion USD in the final quarter. As seen in the pie chart, this year the revenue from Apple Services has reached 22% growth which is expected to rise drastically by the final quarter.

Share

LEAVE A REPLY