In his best-selling book called “The Four: The Hidden DNA of Apple, Amazon, Facebook, and Google”, author Scott Galloway ponders the question of which of these and other tech companies (including Microsoft) will be the first to reach the $1 Trillion mark in terms of market capitalization. For new investors, market capitalization (or “market cap” for short) is computed by taking the number of outstanding shares of stock multiplied by the current price of a single share. For example, if a company has 10,000 outstanding shares and its stock price is at $12, then it has a market cap of 10,000 x $12 = $120,000.
Galloway predicts that Apple may be the winner, but his prediction was made in late fall last year prior to publication. Let’s see if his prediction is still on track.
Here are the current market capitalizations of the above tech names including Microsoft:
AAPL $943B
AMZN $883B
MSFT $821B
FB $504B
GOOGL $359B
(For reference, here are the market caps of other large US companies in non-tech sectors: JP Morgan/Chase (JPM) $379B, Exxon/Mobil (XOM) $345B, Berkshire-Hathaway BRK.A $223B.)
So, it does indeed appear that Apple is still the front runner but Amazon and Microsoft are nipping at its heels. Just one bad quarter or a downward revision may be enough to put Apple’s first place position in jeopardy. For Apple’s market cap to fall to that of Amazon’s current market cap ($883B) means that Apple shares would be trading at $179.5.
Today, Apple is trading around $191.5/share so it would only take a 6.2% move to drop it to $179.5. That’s not unrealistic at all considering its share price dropped over 16% in the latter part of January/early February.
Does Apple have something to worry about? If price appreciation is any indication (and that’s a question for fundamentalists), then perhaps it does.
Recently, Apple shares have significantly under-performed both those of Amazon and Microsoft. Since July 20th of last year (2017), Amazon shares are up 76%, Microsoft’s are up 43%, while Apple shares come in a distant third at 27% (which isn’t shabby considering that the S & P gained 13% in that time). But if Apple’s share price keeps on going at this rate, it won’t take long for the others to over take it.
The race to a trillion is heating up and seeing who first crosses the finish line first will be exciting. Just wonder what the odds are in Vegas…