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Apple Inc’s market valuation is poised to exceed $3tn again, as the US tech giant’s shares reached a new record during pre-market trading on Friday.
In pre-market trading in New York, the company’s shares increased by approximately 1% to $191.74. This year, its market value has risen by 45%, adding nearly $1tn in value, far surpassing the 14.5% gain in the broader S&P 500 index. Apple first achieved a $3tn valuation in early 2022.
Under the leadership of CEO Tim Cook, Apple has surpassed the combined valuation of Alphabet and Amazon and has a lead of half a trillion dollars over its closest competitor, Microsoft.
“Investors have positive expectations regarding the margin expansion observed in recent years, which is supported by increased sales of high-end iPhones and the strength of its services,” said Shannon Cross, an analyst at Credit Suisse.
Apple became the first company to reach a valuation of $1tn in August 2018 and two years later, it became the first company to achieve a $2tn valuation.
Apple’s shares reached $3tn briefly before on the first day of trading in 2022. However, the peak was short-lived as the market declined following Russia’s invasion of Ukraine. At that time, shares reached a high of $182.86, which is lower than the current value due to extensive buybacks reducing the number of available shares.
Apple’s shares ended last year with a 29% decrease. Revenues were impacted during the holiday season due to a Covid-19 outbreak in Foxconn’s “iPhone city” in Zhengzhou, resulting in production line shutdowns and worker protests.
The recent record achieved by the tech giant is arguably more significant than its previous peak in January 2022, when the broader S&P 500 index was valued at over $40tn, compared to its current value of $36.5tn, according to S&P Dow Jones Indices.
During that time, many companies benefitted from the work-from-home trend caused by the pandemic, leading to unsustainable valuations. Additionally, the US Federal Reserve had not yet initiated its rate-rise cycle to combat inflation.
Microsoft’s stock has also increased by nearly 50% this year, primarily due to market hype surrounding artificial intelligence, where the company has become a leader through its partnership with ChatGPT.
The reasons behind Apple’s surging stock are not immediately apparent, as the company has experienced back-to-back quarters of revenue decline, following a 14-quarter growth streak. Analysts also predict a 2.4% decline in full-year revenues this year, marking only the third decline in the past 22 years.
However, Apple’s potential for long-term growth remains strong as the iPhone’s market share increases globally, particularly in emerging markets such as India, where it currently holds a single-digit market share.
“Apple’s $3tn market cap reflects the company’s focus on continuously developing and controlling its key elements of intellectual property, including software, silicon, devices, and services, all with a commitment to providing the best customer experience,” Cross said.
Tom Forte, an analyst at investment bank DA Davidson, attributes Apple’s rally to improvement in the supply chain following China’s decision to end its zero-Covid policy last year. Additionally, investors are allocating more funds to quality stocks after the collapse of Silicon Valley Bank in March.
This new record comes three weeks after Apple unveiled the expensive Vision Pro “spatial computing” headset, which is considered the most significant product launch since the iPhone in 2007.
According to Evercore ISI, Apple could sell 14 million headsets in the first few years, with a slower initial start compared to the Apple Watch or iPhone. However, considering the price of $3,500 per unit, the investment bank estimates that it could contribute $19bn to overall revenue within five years.
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