Apple leads race to become world's first $1tn company

Tech giants likely to pass record valuation if share price rises echo 2017 performance with Amazon, Google, Microsoft and Facebook in with a chance

The race is on to become the world’s first trillion-dollar company, with all eyes fixed on tech giants such as Apple, Amazon, Facebook and Alphabet, the parent company of Google.

Financial commentators and investors predict 2018 will herald the first firm with a stock market valuation of $1tn (£738bn) or more, if technology share prices continue to rise as strongly as in 2017.

Apple is leading the way, with a market valuation of $869bn on Tuesday, a figure arrived at by multiplying the company’s share price by the number of shares in circulation.

The Californian firm that transformed mobile communications, music and photography with the iPhone is $140bn ahead of Alphabet, which has a market value of $729bn.

Apple, which was on the verge of bankruptcy in 1997 when its founder, Steve Jobs, retook the helm, would require a 15% increase in its share price to tip over the $1tn threshold. Apple’s shares increased by 47% last year.

The shares were up 1.8% to $172.26 at the close of trading in New York on Tuesday after a dip in the last couple of weeks.

Barron’s, the US investment magazine, declared on its cover last week that Apple would hit the $1tn valuation this year and that “we don’t think the peak [of Apple’s rise] is near”. Apple earned revenue of $229bn in its latest financial year, and made profits of $48bn – roughly as much as Microsoft and JP Morgan combined.

David Rolfe, chief investment officer at Wedgewood Partners, which manages $25bn worth of funds, told Barron’s: “You have to go back to Rockefeller and Standard Oil to find a company so dominant in a business so large. Other companies settle for unit sales or revenues, but in many quarters, Apple collects more than 80% of gross profit across the smartphone industry.”

The race to become the first $1tn company has opened. Apple has the best shot to be the world's first trillion-dollar company. Requires just a 17% rise in market value from $860bn. The 5 other contenders are Microsoft, Google, Facebook, and Tencent. pic.twitter.com/JSdE4lmsCd

— Holger Zschaepitz (@Schuldensuehner) January 1, 2018

George Salmon, an equity analyst at stockbroker Hargreaves Lansdown, said markets were forecast to continue their boom in 2018 and that it was “just a matter of time” before one of the big US tech stocks tipped over into a trillion-dollar company.

“With Facebook, Google and Amazon attracting an ever-increasing number of eyeballs on screen, the US tech sector has more than played its part in the global stock market rally,” Salmon said. “However, it’s Apple, one of the older tech giants, that’s in pole position to break through the $1tn barrier.”

Ian Forrest, an investment research analyst at the Share Centre, said the creation of a trillion-dollar company was “inevitable”. “It may not happen this year, if we have a correction [fall in stock markets] but it is certain to happen over the next five years,” he said.

Microsoft is in third place with a valuation of $664bn, but some analysts reckon that the online retail juggernaut Amazon is far more likely to take the crown as the first $1tn company because it is growing so quickly. Amazon is the world’s fourth most-valuable company with a market capitalisation of $566bn.

Amazon’s shares increased in value by 58% last year, turning the company’s founder and chief executive, Jeff Bezos, into the world’s richest man with a net worth of $99bn. His fortune increased by $34bn last year. On just one day in October, Bezos’s fortune increased by $10.3bn, when Amazon posted profits much higher than expected and the company’s shares spiked.

Facebook, which floated on the stock market less than six years ago, is in fifth place, with a valuation of $520bn. Shares in the social network rose 56% last year.

The world’s top five companies are collectively worth $3.35tn – more than than gross domestic product of the UK and every other country on Earth bar the US, China, Japan and Germany.

The huge increase in valuations came after global stock markets ended 2017 at record highs, as share prices benefitted from President Donald Trump’s tax cuts and continued quantitative easing from central banks.

Apple share price

Many analysts expect global stocks to continue to rise in 2018, which would be the ninth consecutive year of gains for the US S&P 500 index. However, some are concerned that shares are overvalued and warn of a “correction”.

Other market analysts and financial experts predict Amazon could beat Apple to the $1tn title.

Stephen Mitchell, head of global strategy for Jupiter Asset Management, said it was “definitely a possibility” that a trillion-dollar company could be created this year.

“In the tech sector sales are growing and profits are growing, and most of them [the big US tech companies] have got a huge amount of cash,” he said. “However, I think it probably will not be Apple, I don’t think 2018 is going to be a vintage year for them. It looks as if they have overpriced the iPhone X. You’ve got to look at Google, Microsoft and Amazon. I would say it’s most likely to be Google.”

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Contributor

Rupert Neate Wealth correspondent

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