The market capitalization of Apple Inc (NASDAQ: AAPL) moved ahead of Microsoft’s (NASDAQ: MSFT) last year. It was a humiliation for the world’s largest software company which held the distinction as the leader in market cap among tech companies. In Apple’s race for the top spot among all corporations traded on public exchanges only Exxon Mobil (NYSE: XOM) is in the way. Many Wall St. analysts who follow Apple said that as its stock price moves near $500, it will go past Exxon. The prediction is not ridiculous. Apple had already left giants like Wal-Mart (NYSE: WMT), IBM (NYSE: IBM) and GE (NYSE: GE) in its wake.
Apple bulls expect the successful introduction of the iPad 2 and continued strong sales of the iPhone 4 and its successors will allow the firm to beat analysts estimates in the current quarter. That is not as likely to happen as it was a few weeks ago. Apple sources some of its components from Japan. Japan is also an important market for sales. JPM Securities downgraded Apple, the first such action by any securities firm in more than a year.
Apple faces a number of challenges it did not a year ago. The most obvious of these is the rise of the Google (NASDAQ: GOOG) Android operating system, which has allowed smartphone manufacturers to launch an entire generation of handsets that sell very well. Industry experts have warned that new tablet PCs from rivals, including Samsung, could hurt the growth of the iPad 2.
Apple’s struggles are not the sole reason it no longer has a chance to pass Exxon for the market cap leader’s position. Perceived problems for Apple have driven its stock from an all-time high of $364.90 to $330.01. It would not take much bad news from the company fall even further given how fast the stock has risen in the last two years. Exxon, however, is likely to reap huge earnings from the increased price of crude. Exxon’s share price is up 10% this year compared to the DJIA which is flat. The median analyst estimate for Exxon EPS for the current quarter has risen from $1.62 to $1.88 in just 90 days. And, Apple’s champions were so certain that it would take the No.1 market cap position in 2011.
Apple’s fans were sure it would move to the top position among publicly traded shares. Now its stock value may be lucky not to slip to No.3.
Douglas A. McIntyre