Apple Becomes World's First $3 Trillion Company, But Investors Concerned About Future Growth

Despite occasionally erratic iPhone sales and supply chain concerns, Apple became the first firm to attain a market value of $3 trillion on 3 January 2022, a jump of $1 trillion in just 16 months.

Apple's remarkable expansion was bolstered by surging iPhone sales, which grew over 40 per cent in the 12-month period ending September 2021, reported the New York Times.

Apple's shares hit an intraday record high of $182.88 on the first day of trading in 2022, valuing the Silicon Valley giant at just over $3 trillion. Apple's market value is $2.99 trillion, and the stock ended the session up 2.5 per cent at $182.01, reports noted.

In August 2018, Apple's market worth surpassed $1 trillion, and in August 2020, it surpassed $2 trillion. In 2021, Apple's stock was up roughly 35 per cent. The company has reaped the benefits of increased demand for its new iPhone 13 and other older models, as well as subscription services like Apple Music, Apple TV+, iCloud, and its well-known App Store.

According to a Bloomberg report, Apple's 2022 product launches will include the iPhone 14, updated AirPods, and maybe a virtual-reality headset with augmented-reality elements.

The investment company Wedbush Securities highlighted that demand for Apple goods exceeds supply by around 12 million units, with supply chain concerns projected to alleviate during the first half of 2022, reported Forbes. It also anticipated that an Apple Car would be released by 2025, resulting in even more growth for the company.

Apple co-founder Steve Wozniak told the New York Times: “When we started, we thought it would be a successful company that would go forever. But you don’t really envision this. At the time, the amount of memory that would hold one song cost $1 million.”

In the $3 trillion club, Apple may have some competition. Microsoft is currently valued at over $2.5 trillion, while Alphabet, the parent company of Google, is valued at around $2 trillion. Amazon, with a market cap of $1.7 trillion, and Elon Musk's Tesla with a market cap of roughly $1.2 trillion, are both still massive but lagging behind in this race.

Apple’s Journey

Ford was the first American company to reach a market capitalisation of $100 billion in 1995. After two years, Microsoft became the first American firm to reach $500 billion when Apple was on the verge of bankruptcy. But the latter surpassed its competitors and became the first business in the United States to reach $1 trillion in 2018, thanks to the increasing popularity of the iPhone.

Despite the world economy contracting owing to the coronavirus pandemic in 2020, tech businesses gained from growth in remote labour and online purchasing and Apple became the first American company to reach $2 trillion in revenue. In June 2021, Microsoft surpassed the $2 trillion mark, while Alphabet did so in November.

Due to supply chain challenges, Apple reduced its iPhone manufacturing target from 90 million to 80 million in October 2021, as the time between order and delivery of microchips reached a new high of almost 22 weeks.

According to Bloomberg, demand for the iPhone declined during the 2021 holiday season as supply problems and delivery delays grew. Later it was reported that the tech giant gave $180,000 stock bonuses to some of its top engineers in December last year to keep them from defecting to businesses like Facebook owner Meta.

Apple's revenue from services like video streaming and music has expanded dramatically under Tim Cook, who took over as CEO after Steve Jobs' death in 2011. This helped Apple lower its reliance on the iPhone from over 60 per cent of overall sales in fiscal 2018 to around 52 per cent in fiscal 2021, assuaging investor concerns that the company was overly reliant on its best-selling device.

The Concerns

Some investors are concerned that Apple is reaching the limits of how large it can grow its user base and how much money it can extract from each user, with no promises that future product categories will be as profitable as the iPhone, said Reuters.

In an opinion piece, it was said that Apple is particularly vulnerable to inflation, which is one of the greatest macroeconomic concerns for 2022.

Unlike software and internet companies, Apple's primary business is the sale of physical gear. Apple's profitability will be harmed if salaries, shipping, and raw material costs continue to rise.

Apple has already stated that growing delivery costs are having an impact on the company. Because iPhones and Macs are sold at such high costs relative to their closest competitors, the company's capacity to raise prices any higher is limited. Many people can easily put off buying an expensive smartphone by sticking with their current iPhones for a while longer.

Aside from external economic considerations, it's unlikely that Apple's prospects have much improved to warrant the recent increase. It should be recalled that Apple failed analysts' sales projections for the three months ending in September in late October, and Cook warned that processor shortages would worsen in the holiday period.