We don’t typically opine on individual securities outside of their impact on a specific market segment or the market in general, but recently Apple (AAPL) hit a valuation milestone no other U.S. company had ever achieved. On August 1st, Apple became the first U.S. company to eclipse a market capitalization (stock price multiplied by the number of outstanding shares) of $1 trillion!
Put simply, we are wired to observe and recognize milestones. They are easy to measure, compare and remember (most of the time). In fact, some of them, such as the first manned landing on the moon, invoke an emotional sense of pride in who we are and the values we represent. While others, such as a wedding anniversary (you better remember), have a more personal meaning. To be clear, Apple’s capitalization feat is not comparable to either of these milestones. While the $1 trillion valuation is largely based on the collective value investors place on Apple’s future earnings, the recycled coverage by media outlets is fascinating. Consider this list of previous market capitalization levels, that while interesting, are often repeated when covering a new milestone:
• First U.S. company to reach $1 billion – U.S. Steel (1901)
• First U.S. company to reach $100 billion – GE (1995)
• First U.S. company to reach $500 billion – Microsoft (1999) – Apple was the 6th in 2012
• First U.S. company to reach $1 trillion – Apple (2018)
Although Google (a measly $870 billion market capitalization?) is a less than effective search tool for tracking media coverage as far back as 1901, the media coverage for the $500 billion and $1 trillion milestone are strikingly similar. The space requirements of currency storage (stacked or end-to-end) are a given to create a mental picture of the event’s size in the physical world. However, some of the less obvious comparisons are also strangely repeated for both milestones. To summarize the similarities in media coverage, $1 trillion would buy you the inflation adjusted value of many of the same things as Apple’s previous $500 billion milestone would have:
• the nearly 50,000 miles of U.S. Interstate Highway System;
• the entire National Football League;
• the top 50 valued sports teams in the world; or
• every home in several major metropolitan areas.
We even came up with one of our own that actually points in the opposite direction, namely, – you could have purchased slightly more iPhones in 2012 with only $500 billion.
• $500 billion / $399 in 2012 = approximately 1.25 billion iPhones
• $1 trillion / $999 in 2018 = approximately 1 billion iPhones
While any company’s ability to innovate, adapt, and evolve to meet marketplace needs is ultimately one of the primary drivers of its long-term valuation potential, arbitrary milestones are just more fun to talk about. So, although Apple has received an excessive amount of media sound-bites for reaching a nice, round $1 trillion, does it have a deeper or actionable meaning? Not to be anticlimactic, but outside of an interesting piece of historical market trivia, probably not too much.
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