became the world's first $620 billion company yesterday. Is the
tech giant on its way to becoming a trillion dollar company, or
History has not been kind to stocks with valuations exceeding
$500 billion - as our own Andy Crowder adroitly
when Apple crossed that hallowed barrier back in March.
Five other companies had reached the $500 billion level prior
They were, in chronological order,
), General Electric (
None of them retained their half-trillion dollar valuations
for very long.
Exxon, the most recent company to accomplish the feat prior to
Apple, crossed the $500 billion mark in July 2007. By early 2008,
it was back below $500 billion for good.
Cisco, Intel and Microsoft all turned the $500 billion trick
during the dot-com boom back in late 1999 and early 2000. When
the bubble famously burst, each one of those blue-chip tech
stocks came crashing back to earth. Today their combined
valuation is roughly $130 billion less than Apple's
record-setting market cap.
General Electric's $500 billion coronation also occurred
around the turn of the century. Its decline since has virtually
But Apple, of course, didn't stop at $500 billion. It took
only a month for the company to blow past the $600 billion
Microsoft is the only other company to eclipse $600 billion,
peaking at $619 billion in late 1999. Within a year, the company
had lost more than half its value.
Is Apple headed for a similar fall? Impossible to know for
sure - and anyone who tells you otherwise is lying.
Here's what we do know, however:
Apple is not overvalued.
With a forward P/E of 12.3, Apple is actually pretty cheap for
a tech stock - especially when you consider that Microsoft,
Cisco and Intel were all trading at better than 50 times
earnings before their comeuppances. That brings me to my next
There is no dot-com bubble this time.
The main reason why those three tech stocks became so wildly
overvalued in the late '90s and early 2000s was because the
dot-come sector as a whole was overvalued. Speculation ran
rampant concurrent with the Internet's meteoric rise in the
late 20th century. Now that the sector has largely stabilized -
with most blue-chip, dot-com stocks now trading in line with
their P/E ratios - Apple isn't as prone to the kind of mass
correction we saw in late 2000/early 2001.
Apple still has plenty of room to grow.
The company's profits have nearly doubled in each of the last
two years. Demand for its signature iPhones and iPads continues
to grow - with new versions of each reportedly set to
within a matter of months. And even after the death of the
company's brilliant founder Steve Jobs last year, Apple remains
the most innovative company on the planet, churning out newer
and better products seemingly by the month.
For all its innovation and growth potential, however, there is
still no guarantee Apple's stock will continue to rise. In a
global marketplace plagued by uncertainty, even a company as
historically strong as Apple is vulnerable to slowing sales.
That said, I wouldn't bet against them. Any investors who have
done so over the past eight years have likely cost themselves
quite a bit of money.
Make no mistake - at $621 billion, Apple has sailed into
dangerous, unchartered waters.
But no company has ever been better equipped to navigate those