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Why Apple’s Milestone Is “Not That Amazing”

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Another major milestone for Apple (AAPL) on Monday when it became the most valuable publicly traded company ever (before adjusting for inflation).

The tech stock ended the day up 2.63 percent to close at $665.15 a share, giving it a market capitalization of $623.52 billion. The stock is up more than 60 percent in the last year. Its market capitalization has doubled in the last 19 months.

In early trading Tuesday the stock was up another 6 percent to $671 a share.

Apple surpassed Microsoft's $616.34 billion market capitalization record set in 1999. However, after Apple eclipsed Microsoft's all-time high, many critics pointed out that Apple's blockbuster-figures have not been adjusted for inflation. Its stock price would need to top $900 in order to exceed Microsoft's record market value in real terms, which has been calculated by some analysts to be $850 billion.

Apple's achievement is "astounding," says The Daily Ticker's Aaron Task in the accompanying video, noting that Apple is currently worth more than Microsoft, Intel and Google combined while the number two most valuable company, ExxonMobil (XOM), trails Apple's valuation by more than $200 billion. "It is staggering, staggering stuff that I haven't seen in my years covering the market — any single company having this much value relative to the rest of the other major mega-caps out there," he says.

But our Henry Blodget is not that surprised by Apple's accomplishment for two key reasons:

  1. Inflation increases the value of all companies over time.
  2. Apple's mega-earnings support its valuation.

"It is actually not amazing that Apple is worth $623 billion," says Blodget, adding the company is reasonably valued because the stock is trading at 13 times earnings. He notes that Apple is delivering on earnings in all major product lines, including the iPhone, iPad and to a lesser extent the Macbook.

Apple's recent run-up in stock price — even after its lackluster earnings report last month due to lack of demand for its current iPhone — is largely attributed to the growing anticipation for the iPhone 5, which is rumored to be released Sept. 12.

"This quarter is going to be terrible…because we are in the waning days of the iPhone 4S and everybody is focused on the iPhone 5," says Blodget. If the company delivers on the new phone, it is clear sailing ahead for the rest of the year, but if the phone is a disappointment, "look out below," he says as more than half of Apple's revenues come from iPhone sales.

But Apple could still have a banner year. Consumers and investors are highly anticipating the company's release of the iPad mini and a new Apple TV. Plus, the last three months of the year include the holiday shopping season, which is always good for the company's bottom line.

Tell us what you think! Does Apple's valuation surprise you?

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