The technology rally goes on with Silicon Valley tech giant Apple topping the $2 trillion valuation mark overnight.
Shares in the Cupertino, California-based company briefly touched highs of $468.65 on Wednesday (19 August), pushing the market capitalisation to $2.004 trillion, before easing back slightly to end the session at $462.83 ($1.98 trillion market cap), an all-time closing high.
This is a stunning breakthrough for the iPhone maker, coming just two years after it became the first publicly-traded company to hit a $1 trillion valuation.
APPLE VS PEERS
So, the shares must be super expensive, right? The most frequently used measure to compare is the price to earnings (PE) multiple. Apple’s stands at 35.6 for this full-year to 30 September 2020.
That drops to 29.8 for 2021, or put it another way, a PE of 30.5 on a rolling 12 months basis, according to Refinitiv data.
How does this stack up versus tech giant peers, and the tech sector?
Apple versus other tech giants | |
| 12-month PE | |
| Apple | 30.5 |
| Alphabet (Google) | 29.9 |
| Amazon | 82.9 |
| 28.0 | |
| Microsoft | 31.7 |
| Source: Refinitiv |
This year Apple is forecast to generate return on equity (RoE) of 76.7% and return on invested capital (ROIC) of 45.5%.
Apple versus the tech sector | ||
| Apple | Tech sector | |
| PE | 30.5 | 31 |
| EV/Revenues | 6.3 | 7.5 |
| EV/EBITDA | 22.1 | 51.3 |
| Price to Cash Flow | 23.1 | 36.2 |
| Source: Refinitiv |
DRIVING THE STOCK
Investors have been piling into Apple stock as part of a long-term bet that the world’s tech giants can continue to dominate markets and grow at above average rates in a post-Covid world.
But more specifically, investors are starting to believe in an Apple future beyond phones, tablets and watches hardware as the company continues its shift to services for its users, including video, music and games.
And the impact of the share price has been astonishing. The stock has rallied more than 20% in August since knock out second quarter figures at the end of July, 54% year to date, and has more than doubled pandemic lows of $224.37 in March.
KNOCK OUT LAST QUARTER
Apple saw revenue increase 11% to $59.7 billion for the three months ended 30 June, the company’s fiscal third quarter of 2020. Analysts had expected revenue to drop 2% to $52.6 billion on average. And earnings per share of $2.58, up 18%, crushed the average forecast of $2.07.
The iPhone maker is set to split its stock on a four-for-one basis effective on 31 August, with the company saying it aims to make its shares more accessible to individual investors, much like Tesla recently announced.
