Apple hit $3 trillion market value, can it keep making crazy money?

Jan 11, 2022 Other


Source: Insights 

WeChat ID: lxinsight

Author: Han Ying

Last week, Apple's share price reached $182.88 per share and its total market value once exceeded $3 trillion, making it the first company in the world to be in the $3 trillion club.

Notably, not only did the market capitalization surpass a new high, but Apple's sales also hit a new high last year. In 2021 fiscal year (September 27, 2020 - September 25, 2021), Apple's hardware product revenue reached $297.392 billion, up 34.72% year-on-year.

In less than four years, Apple's stock price has tripled and is just one step away from a $3 trillion market cap, a milestone that few companies can reach.

As for this market cap breakthrough, some analysts say that Apple has tripled its market cap in less than four years and still has a lot of room to grow in the future. However, the Wall Street Journal disagrees, they believe there is a bubble in U.S. technology stocks.

Apple's core product line has been criticized for its lack of innovation since Steve Jobs' death. Therefore, Apple is also trying to find new stories.

In recent years, Apple's performance has been up and down. With increasing competition from Chinese smartphone manufacturers, coupled with the pressure of anti-monopoly, there are still many variables in Apple's future.


Apple hit its new high after reaching a $3 trillion market cap

It takes Apple 40 years to become the first company in the world to reach a $3 trillion market cap.

Apple became the first publicly traded U.S. company to hit a $1 trillion market cap during intraday trading on Aug. 2, 2018. It hit a $2 trillion valuation just over two years later on Aug. 19, 2020. Now, it has come to the doorstep of $3 trillion.

What does $3 trillion mean? Translated into global GDP, Apple exceeds the annual GDP of the United Kingdom in 2020; by market value, Apple's market value is equivalent to 2.5 Tesla, 5 Tencent and 50 Xiaomi.

Even in the recent past, after the outbreak of Omicron, when Google, Amazon, Facebook and Microsoft shares all fell to varying degrees, Apple rose 3.1% against the wind. One thing need to know is that in 1982, Apple went public in the U.S. with a market cap of $1.8 billion.

In 40 years, Apple's market cap has risen more than 1,600 times. Behind this, Apple has a large and stable cash flow backed by a cash reserve of more than $200 billion in hand.

The milestone market cap is the capital market's recognition of Apple's business performance, and the amazing business performance comes from increased sales.

"This year we launched our most powerful products ever, from M1-powered Macs to an iPhone 13 lineup that is setting a new standard for performance and empowering our customers to create and connect in new ways," said Tim Cook, Apple's CEO.

In fact, this is not a self-aggrandizing statement by Tim Cook. The data from the market also proves the strong performance of iPhone 13.

Morgan Stanley forecast that Apple to ship 83 million units in the fourth quarter of 2021, but 3 million more than expected ..., Clearly, the Wall Street underestimated Apple's appeal in the smartphone market.

Looking at global smartphone manufacturers, Apple's performance in the third quarter of 2021 was also notable. IDC reported that while global smartphone shipments fell 6.7% year-on-year in the third quarter of 2021, Apple bucked the trend and grew 20.8%, the highest growth rate of the world's top five smart phone manufacturers. In the quarter, iPhone shipments were 50.4 million units, ranking second in the world with a 15.2% market share.

Meanwhile, Apple's wearable gadget business grew like gangbusters over the holidays. Apple sold 27 million pairs of its newest AirPods model over the holidays, according to top Apple analyst Ming-Chi Kuo of TFI Asset Management Limited. Kuo expects 20% year-over-year growth for Apple's wearables business for the holiday quarter.

It can be seen that Apple's iPhone sales also brought revenue growth for Apple. Apple's fourth-quarter earnings report showed that Apple's revenue for the quarter was $83.4 billion, up 29% year-on-year, and profit for the quarter was $20.6 billion, up 62% year-on-year. Among them, iPhone revenue reached $38.8 billion, up 47% year-on-year, accounting for 46.62% of total revenue.

Putting the perspective to the whole fiscal year 2021, Apple's hardware product revenue reached $297.392 billion, an increase of $76.6 billion compared to fiscal year 2020, an increase of 34.72% year-on-year. This, in addition to the iPhone, other products are also in strong demand. iPad revenue of $31.862 billion, up 34.3% year-on-year; Mac revenue of $35.19 billion, up 23% year-on-year.

What has to be admitted is that the iPhone series has brought a veritable high sales volume for Apple. With more than $100 billion in cash on its books, Apple has been giving the capital market a boost.


Can Apple keep making crazy money?

It can be said that ten years ago, Steve Jobs created the aesthetics of technology. iPhone 4 emerged, adding a colorful stroke to the history of global technology.

Ten years later, even with record sales and a market value of $300 trillion, people still comment on Apple's "lack of innovation".

In fact, the "no innovation without Steve Jobs" cliché was a common refrain when Cook first took over Apple. A prominent Silicon Valley investor once told Fortune, "Apple needs talented product managers, not people like Cook who just get the job done."

It can be seen that the main products such as iPhone and iPad are changing less and less, and the same screen is used for five years, Apple's innovation is really lacking. Because of this, although Cook is a qualified businessman, but has been seen as an unqualified product manager.

The disparity between the two helmsmen has also led to a marked change in Apple's trajectory.

In the past, Apple in the Steve Jobs era was known for its focus. At that time, Jobs cut the product line to only 4 types of products, and Apple's product line was dedicated enough.

In Cook's time, it was replaced by the continuous enrichment of product lines. In addition to the main products such as iPhone and iPad, wearable devices such as iWatch and AirPods, and paid software services have become Apple's new growth points. Among them, the most representative ones are iWatch and AirPods. These two hardware products have given Cook a representative work and led Apple to occupy a certain market share.

It must be admitted that AirPods is one of the successful products launched by Apple in Cook's era. In 2016, the first generation of AirPods was unveiled. At that time, there was no TWS (True Wireless Bluetooth Headset) headphone craze in the market, and TWS were not fully appreciated by consumers. Under this premise, AirPods came out of unknown demand and Apple took the first place in the global TWS market, occupying 23% of the market share, far exceeding the second place Xiaomi's 10% market share.

Another innovative product, iWatch, has been iterated to the seventh generation of products since its introduction in 2014. The Apple Watch has found its position since its inception, namely communication, sports and health. Counterpoint Research data showed that Apple's smartwatch shipments was the world's number one in 2020, reaching 339 million units, with a 6% market share increase and a 40% market share of global smartwatches. And in Apple's fiscal year 2021 third quarter earnings call, Cook also said that 75% of the world's Apple Watch in the quarter was a new user.

However, in the most popular iPhone series, Cook did not come up with too much innovation, and therefore also let the outside world a little disappointed. A few months ago, after the launch of iPhone 13, it was also evaluated by one of Apple's stockholders, Yi Yongping, as "nothing new again as in previous years."

Today, Cook still faces great pressure, can he make innovative moves before retiring?


Does Apple have a new story?

Although Apple becomes first company to hit $3 trillion market value, there is no absolute safety in a large company, as Nokia illustrated.

Behind Apple's $3 trillion market cap, the Wall Street Journal analyzed that it was a combination of the bubble that exists in U.S. technology stocks and the expectation that Apple could develop its next big hit.

In fact, Apple's market performance does face the problem of being too dependent on iPhone sales, and the innovation about the iPhone is also troubling Apple.

Apple make great achievement but it is not worry-free in the smartphone market. Ethan Qi estimated December or January would be a turning point after Chinese iPhone owners finish upgrading their older devices. In early 2022, Apple could fall behind local Chinese brands like OPPO, Vivo and Honor.

Right now, with global smartphones entering a period of stock and a lack of new stories in the market, foldable phones are undoubtedly the cake that smartphone manufacturers are fighting for.

In this market segment, Samsung and Huawei launched foldable phones, and other Chinese brands also enter the track, such as Xiaomi, OPPO, Honor, Vivo and  Realme.

Likewise, Apple may also join in this road. Based on sources, Analyst Ming-Chi Kuo says that Apple expects to ship up to 20 million units in the first year.

From Apple's current progress, the foldable phone is seen as a new battlefield by smartphone manufacturers, whether it can become a new story of Apple's smartphone business is still unknown.

In addition to phone products, Apple is also looking for a new story.

Currently, the metaverse seems to be a hot buzzword in 2021. As AR technology, which is similar to metaverse, Apple has been exploring it for more than 10 years.

Apple's widely-rumored AR/VR headset is coming at the end of 2022, with shipments to ramp up in the first quarter of 2023, and Apple Glass will be released in 2025, according to analyst Ming-Chi Kuo.

In fact, among many smartphone manufacturers, the outside world's speculation about Apple's VR is the most. There are even voices that AR devices will be the new form of Apple in the next decade.

This statement is not an empty wind. It is reported that in 2021 alone, Apple has been awarded 11 patents related to AR, including the headset UI that provides eye-movement and point-of-view tracking; headset system that allows users to gaze input and edit text content; headset system can be paired with a virtual keyboard and Apple Pencil; headset can support users through gaze, touch, gestures and body posture control.

Bloomberg has also reported that Apple has decided to hire Andrea Schubert, Meta's communications and public relations lead for its augmented reality (AR) products, to prepare for the official release of AR or MR products next year. As we all know, Meta is exactly the latest name change by Facebook to catch the metaverse buzz.

"When we look back, AR technology will be one of the major milestones." At a quarterly earnings analyst meeting in 2017, Cook first spoke highly of the potential of augmented reality technology. It was also the year that Apple released the ARkit kernel. Cook's importance to AR technology is evident.

But, interestingly, while the metaverse concept was a big hit this year, Cook refused to bundle AR with the metaverse. In an interview with TIME Magazine, Cook emphasized that AR allows the virtual world and the real world to intersect, rather than fragment, and strengthens the relationship between human beings, rather than alienating them.

In addition to smartphone and metaverse, in the field of smart cars, the attention of the outside world to Apple has never waned. It is reported that Apple's first EV car is expected to be released in September next year. This is a new story that Apple has been trying to tell.

But what needs to be understood is that there are already many players in the new energy vehicle market, and the time left for Apple to build a car is not much. In this highly competitive market, it is not an easy task for Apple to take the lead afterwards.

Apple is no longer a leader in the new field, but more like a follower. But as a heavyweight player, Apple's entry is bound to attract the attention of other players in the market. And as the disruptor of the technology world, the market is expecting Apple to bring new surprises.

Cook once said that he would not sit in the position of Apple CEO for another 10 years. Today, Cook's only regret is that he has not created a truly groundbreaking product with his own hands. Electric cars and VR devices, which will be the groundbreaking products of the Cook era, need to be answered by Apple.

Apple has been the world's highest market cap company in recent years, except for a brief period in the second half of last year when it was surpassed by Microsoft. Now, with market cap and sales at record highs, Apple feels very complicated. In the changing external environment, Apple must come up with something new. After all, relying solely on the iPhone to tell the old story does not work.