Apple set to break through $3tn valuation again

Receive free Apple Inc updates

We’ll send you a myFT Daily Digest email rounding up the latest Apple Inc news every morning.

Apple’s market valuation is set to surpass the $3tn mark again as shares in the US tech giant hit a fresh record in pre-market trading on Friday.

Shares in the company rose about 1 per cent to $191.74 in pre-market trading in New York. Its market value has rebounded 45 per cent this year, adding nearly $1tn in market value and far outpacing a 14.5 per cent gain for the broader S&P 500 index. Apple first crossed $3tn in early 2022.

Under chief executive Tim Cook, Apple has grown larger than Alphabet and Amazon combined and has a half-trillion-dollar lead over its nearest rival, Microsoft.

“Investors are positive on the margin expansion seen in the past couple of years, which is supported by increased sales of high-end iPhones and strength in services,” said Shannon Cross, analyst at Credit Suisse.

Apple was the first company to achieve a $1tn valuation in August 2018 and two years later became the first company to be valued at $2tn.

Apple has hit $3tn once before, on the first day of trading in 2022. The peak, however, proved brief, and markets later spiralled down following Russia’s full-scale invasion of Ukraine. At the time, shares reached as high as $182.86 — lower than they are now, since there are fewer shares available following extensive buybacks.

Apple shares ended last year down 29 per cent. Revenues were curtailed in the holiday quarter after an outbreak of Covid-19 in supplier Foxconn’s “iPhone city” in Zhengzhou led to production line shutdowns and worker protests against strict policy measures.

The tech giant’s latest record is arguably more significant than its previous peak in January 2022, when the broader S&P 500 was worth more than $40tn, versus $36.5tn now, according to S&P Dow Jones Indices.

Many companies at that time had benefited from work-from-home trends induced by the pandemic and pushed to unsustainable valuations. The US Federal Reserve had not yet embarked on its rate-rise cycle to battle inflation.

Microsoft’s stock is also up nearly 50 per cent this year thanks to market hype around artificial intelligence, where it has become a leader after partnering with OpenAI, the start-up behind ChatGPT.

The factors behind Apple’s soaring stock are less obvious, as it has recorded back-to-back quarters of revenue declines — following a 14-quarter growth streak. Analysts also project full-year revenues this year of $385bn, a fall of 2.4 per cent and only the third decline of the past 22 years.

But Apple’s longer-term potential to return to growth is strong as the iPhone’s share of the market picks up globally, particularly in India and emerging markets where it has just single-digit market share.

“Apple’s $3tn market cap reflects the company’s long-term focus on continuing to develop and control the key elements of their IP — software, silicon, devices and services with a concentration on providing the best customer experience,” Cross said.

Tom Forte, analyst at DA Davidson, an investment bank, attributed Apple’s rally to supply chain improvement after China ended its zero-Covid policy last year, and investors putting more cash into quality stocks following the collapse of Silicon Valley Bank in March.

The new high also comes three weeks after the iPhone maker unveiled an expensive headset that could set the company’s future course beyond the smartphone.

The Vision Pro “spatial computing” headset is broadly seen as the most significant product launch from Apple since the iPhone in 2007.

Evercore ISI estimates that Apple could sell 14mn headsets “in the first few years” — a much slower start versus the Apple Watch or iPhone. But, at a price point of $3,500 per unit, the investment bank estimates it could add $19bn to overall revenue within five years.