Apple Now Most Valuable Company in History
Apple (NASDAQ: AAPL) became the most valuable company in history on Monday in terms of market capitalization. Heading into the final hour of trade, the stock had risen better than 2 percent, to give the company a market-cap of over $620 billion with shares trading over $662.00 apiece. The reason for the rise in the stock on Monday appears to be rumors surrounding the iPhone 5. There has also been increased buzz surrounding the iPad mini and the Wall Street Journal reported last week that the company has expanded its plans for a "set-top box."
The previous record-holder in terms of aggregate market-cap was Microsoft (NASDAQ: MSFT) which hit its all-time high on December 30, 1999 at the height of the technology bubble. Apple's achievement does not take into account inflation, however, and Microsoft was considerably more valuable on an inflation-adjusted basis in December 1999. In inflation-adjusted dollars, Microsoft's market-cap reached a high of around $850 billion. The company now has a market-cap of about $257 billion.
Over the last 10 years, MSFT has risen around 23%, but the stock has been largely range-bound since falling from its all-time high. In terms of value, Apple's market-cap would need to rise around another 37 percent to become the most valuable company ever, when adjusting for inflation. It could be instructive for investors to consider the trajectory of Microsoft, as it could end up being comparable to Apple.
The stock rose for years prior to hitting its high in December 1999. Microsoft then fell considerably, coinciding with the tech crash. What should be considered, however, is that the stock has subsequently not completely plunged and could conceivably make a run at those all-time highs once again.
The stock also offers a healthy dividend yield and has been a stable vehicle of capital preservation. Eventually, a similar outcome could be likely for Apple, although at what level the stock peaks is anyone's guess. On a valuation basis, however, Apple still looks inexpensive. Despite its massive market-cap, the stock is still trading at a trailing P/E of under 16, and a forward P/E of under 13.
Given the company's unbelievable innovation over the last few years, and the subsequent mountains of cash that it has earned as a result, the likely catalyst for the stock to eventually peak and decline will be Apple's inability to continue to innovate at its current pace. Certainly, this is likely to happen at some point as the company confronts the burdens of stunning success in a relatively short period of time. In the current environment, however, Apple is showing few signs of slowing down and could very easily make a run at becoming the most valuable company in history in both absolute and inflation-adjusted terms.
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