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What Apple's $3 trillion market value indicates

Only 4 nations - US, China, Japan and Germany - have GDP larger than Apple


The first trading session of 2022 was a pivotal event for Apple Inc, as the firm's market value surpassed $3 trillion, making it the first corporation in the world to do so. The company took 42 years to reach $1 trillion in market value, but just two years to reach $2 trillion. Surprisingly, the $3 trillion barrier was reached in only 16 months, owing to the worldwide market rally. Interestingly, the magnitude of the value of the company can be gauged by the fact that there are only four nations - US, China, Japan and Germany - whose GDP is larger than Apple. This being built by 1,50,000 odd employees. Experts call it true value creation.

“As a shareholder, it is wonderful to be a part of the most valued company in the world. The company has consistently delivered above expectations and the stock has consistently beaten the market and also exceeded analyst expectations. If you look at the outlook, iPhone 13 has been doing really well and is garnering huge demand. Though there are rumours around chip shortages, I do not believe it is going to hurt the company too much. In the long run I believe this is probably the best investment I have made,” remarked Bengaluru-based professional Ravi Kumar (name changed on request), an Apple shareholder, a US-returnee.

Experts point out that investors are now reaping the benefits of fundamentally strong firms such as Apple. “It is apparent that investors are investing their money into fundamentally sound firms rather than investing in volatile equities, especially in the long run. The company is also repaying its investors by introducing good products in the market. Along with the strong fundamentals, the emerging technologies like 5G, intelligence and Virtual Reality (VR) have helped surge in the stock price,” said Gaurav Garg, Head of Research, CapitalVia Global Research Limited told THE WEEK.

The surge in Apple's market value also proves the fact that if one creates good products, value will accrue, as over the last five years, the stock has gone up by almost 500 per cent. “Even a seasoned investor like Warren Buffet has made a killing with the bull run. Having said that, these are one-time events in history and Apple seems to be leading on every front when it comes to the race. I completely believe that unless the fundamentals are strong, no one can sustain and that too when the markets are brutal. Apple's innovation which is their core and the quality of products are leading the way for their valuation. What this does for the ecosystem is the confidence it helps build in the markets, in technology and also fundamentally the business per se and industry. This is a moment the whole world should celebrate and not just Apple or its shareholders. I am sure Apple will continue to lead the way in terms of innovation and this is just the beginning of a long journey,” said Sathya Pramod, CEO Kayess Square Consulting Private Limited.

Market experts point out that the world’s most valuable company reached the milestone as investors bet that consumers will continue to shell out top dollar for iPhones, MacBooks and services such as Apple TV and Apple Music. “The stock is trading at around 30 times 2022 fiscal year’s earnings estimates, which is more than 50 per cent above its five-year historical average. Certainly, there is excitement over new products in the pipeline such as the Apple Car and augmented reality headsets. But it will be years before any of these offerings can move the needle for the multi trillion-dollar giant. The company is reportedly planning to release a self-driving car in 2025. But after years of delays and development troubles throughout the autonomous vehicle sector, that target hardly seems reliable. The market is rewarding companies that have strong fundamentals and balance sheets, and the companies that are hitting these sorts of huge market caps have proven they are strong businesses,” said Narendra Solanki, Head Equity Research (Fundamental), Anand Rathi Shares and Stock Brokers.

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