Apple’s tryst with $3,000,000,000,000: A testament to rapid growth

The milestone may be symbolic, but is the biggest testament to Apple’s ability to grow, and grow rapidly. Apple now commands 6.8% of the total value of the S&P 500

When Apple reached another milestone earlier this week, breaching the $3 trillion market cap, albeit briefly, it was very much a sign of things to come. The tech giant became the first-ever publicly-traded company to be worth that much. For some perspective, this was more than Netflix, Goldman Sachs, Starbucks, IBM, Walt Disney Co., Nike, Walmart, JP Morgan Chase, Johnson & Johnson, and PepsiCo combined. The numbers are staggering.

On January 4, Apple celebrated 45 years of corporate existence(REUTERS)

On January 4, Apple celebrated 45 years of corporate existence. Perhaps fitting then, that it was that day the company breached the $3-trillion milestone. “Anniversaries are arbitrary; market cap is functionally meaningless; but it’s breathtaking to look back on all we’ve done,” wrote longtime Apple employee Chris Espinosa, in a tweet. Known as employee number 8, Espinosa joined Apple in 1976 aged 14. He is said to be Apple’s longest-serving employee.

Apple leads as the rest follow

Scarcely could Steve Jobs have imagined in 1976, when he repurposed the garage at his parents’ home in Los Altos, California to make computers, that his legacy would be as valuable as it is today. This doesn’t come as a bolt out of the blue either. It was in August 2018 when Apple became the first company to touch the $1 trillion mark. Two years later, in August 2020, the iPhone makers crossed the $2 trillion market cap valuation. And here we are, a year and 4 months later, the $3 trillion market cap has been crossed.

Microsoft is currently the best of the rest, with a $2.5 trillion market cap, with Google ($1.92 trillion), Amazon ($1.72 trillion) and Tesla ($1.2 trillion) following some distance behind. Meta, formerly Facebook, joined the trillion club in June. Microsoft seems well placed to join Apple in the $3 trillion club, sometime in the next few months.

The milestone of a $3 trillion market cap may be symbolic, but is the biggest testament to Apple’s ability to grow, and grow rapidly. Apple now commands 6.8% of the total value of the S&P 500.

Pandemic didn’t slow down sales

One doesn’t have to look too far into the past to chart how successful the product lines have been. In the four quarters ending September 2021, Apple sold $192 billion worth of iPhones — that was 40% more than the year before. Analysts including Ming-Chi Kuo, are confident that Apple sold 90 million AirPods in the holiday quarter of 2021 (that’s October-December), of which 27 million are the newest AirPods, launched late last year. That would mean a 20% growth, year on year.

Apple doesn’t give specific numbers for AirPods among some other product lines including the Watch and HomePod, consolidating them instead in the “Other Products” category. At the end of Q1 2021, Foxconn reported a 44% year on year growth in sales of the iPhone 12 models (iPhone 13 launched later in the year), mostly driven by the work from home (WFH) workforce.

Another analyst, Daniel Ives of Wedbush, estimates more than 40 million iPhone 13 phones were sold in the holiday quarter. That’s just the four iPhone 13 series phones. For a year that didn’t really have any new product lines, it was still a busy 12 months — the new MacBook Pro 14, the very powerful M1 updates for the iPad Pro series and the iMac 24-inch widened existing product lines.

The Midas touch: Tim Cook’s successful mission

When Timothy Donald Cook took over the reins as chief executive officer at Apple Inc. in 2011, following the passing of his legendary co-founder Steve Jobs, Apple had a $350 billion stock market valuation. Many wondered if Cook would be able to find another winner after the iPhone.

Pricing is something Apple perhaps faces most criticism for. Despite that pressure, Cook and Apple never let go of Apple's positioning as a premium brand. Along the way, tough competition from brands selling more affordable phones, laptops, tablets, and earbuds, simply added to the chorus that iPhones are expensive. It must have taken courage not to give in to the temptation to launch a range of more affordable iPhones or make a lower-priced version of the MacBook.

WFH and the Apple’s walled garden

A lot of investor trust comes from expectation. Services, which have been seeing consistent growth, had a record-breaking last 12 months. That includes App Store, Apple Music, Apple TV+ and Apple Fitness+ (this is available in some countries). There could be the hint of the work-from-home way of life felt in the services — users will need more software (that’s where the App Store revenue share comes into play), subscribe to Apple Music and renew Apple TV+ once the free trials end.

Quite unlike how Apple may have approached this a few years ago, over time, Apple Music has been rolled out for billions of Android phones globally. Apple TV+ streaming is now available on all Android TV and Google TV devices as well as the Amazon Fire TV platform, Sony PlayStation, Microsoft Xbox and Samsung TVs.

Cash pushes Apple’s investments

Cash in hand, of which Apple has a lot, allows the company to invest in markets such as India. The company has been investing in India via partners Foxconn, Wistron and Pegatron as well. That’s something Priya Balasubramaniam, vice-president for Operations at Apple India alluded to during her address at the Bengaluru Tech Summit in November. “Today, Apple supports around one million jobs in India, from our employees to the fast-growing iOS app economy, to our work with supplier partners,” she said at the time.

2022 doesn’t indicate any slowdown

The demand for many Apple product lines, the iPhones and Macs, in particular, isn’t likely to cool. The emergence of Omicron extends the pandemic for an unknown duration, and there will be a renewed surge in sales for devices for work, education, play and entertainment. There could be some slowdown in the June quarter, but that is a sign of buyers and holding on to cash in expectation for the big September announcements and all that follows after. One way for Apple to turn that on its head could be to launch an affordable iPhone earlier in the year — it has been a while since the iPhone SE was updated.

Let us not forget, this could be the year of the big iPhone update. Apple seems to be in a good position with component supplies, and that should give it confidence for an initial production run as well. It was in 2020 when the iPhone 12 ushered in a new design language, serious camera upgrades and the smallest iPhone in the line-up. Everything saw incremental updates in 2021, which gives credence to the argument that 2022 will again see larger upgrades in store for the iPhone series.