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Which Way Does Apple (AAPL) Go from Here?

Posted
8/21/2012 8:57:00 AM
By: Wyatt Investment Research
Referenced Stocks:AAPL;GE;INTC;MSFT;XOM

Apple ( AAPL ) became the world's first $620 billion company yesterday. Is the tech giant on its way to becoming a trillion dollar company, or the next Cisco (NASDAQ; CSCO) ?

History has not been kind to stocks with valuations exceeding $500 billion - as our own Andy Crowder adroitly chronicled when Apple crossed that hallowed barrier back in March.

Five other companies had reached the $500 billion level prior to Apple.

They were, in chronological order, Microsoft ( MSFT ), General Electric ( GE ), Cisco, Intel ( INTC ) and Exxon ( XOM ) .

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 mirrored Microsoft's.

But Apple, of course, didn't stop at $500 billion. It took only a month for the company to blow past the $600 billion mark.

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:

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 high seas.