Investing

Apple Market Value Has Dipped to $2.18 Trillion This Year

Only 52 U.S.-listed companies have market caps of between $120 billion and $200 billion, and only 38 are valued at more than $200 billion. Apple Inc. (NASDAQ: AAPL) tops the list with a market cap of $2.18 trillion.

Just a week ago, the company’s market cap topped $2.30 trillion. That means that Apple’s market cap fell by more than the value of all but 89 of the largest U.S.-traded firms.

Apple’s shares lost more than 6% in two days, including a decline of nearly 1% on January 27, before it announced earnings after markets closed for the day. Must have been a miserable quarter, right?

The company reported earnings per share of $1.68, beating the consensus estimate by 19%, and revenue of $111.4 billion, better than the forecast by nearly 8%. iPhone revenue rose by 17% year over year to a whopping $65.6 billion, while sales of Mac computers rose 21% to $8.7 billion, iPad sales rose 42% and Services revenues jumped 24% to $15.8 billion.

As of Thursday’s close, Apple stock traded down by 2.1% for the year to date, compared with a year-to-date high of up nearly 8% at the closing bell on January 26. Is Apple struggling or doing something wrong?

Apple is not struggling, nor is it doing anything particularly wrong. True, it is having some trouble finding a partner to build a rumored Apple Car, and it’s not following Tesla’s lead in investing in bitcoin, but neither is an unmitigated and irredeemable failure.

What happened is the Apple became a victim of its own success. Big investors like Warren Buffett’s Berkshire Hathaway and Vanguard Group sold some of their stake in Apple. Berkshire Hathaway sold nearly 10 million shares of Apple stock in the quarter for just over $1 billion. Buffett is Apple’s second-largest shareholder. Vanguard Group, Apple’s largest shareholder, sold more than 25 million shares of the stock in the December quarter, dropping its stake in Apple from 7.53% to 7.48%, according to MarketWatch. Buffett’s stake dipped from 5.55% to 5.28%.

Apple’s other issue is that the company generates so much cash that its stock can sometimes trade in the same way as government or corporate bonds. Bond markets have been worrying about inflation and likely higher interest rates. Inflation lowers the value of bonds that provide investors with a reliable stream of cash flows over the long term.

Apple’s free cash flow during its 2020 fiscal year totaled $73.7 billion. That’s more than the gross domestic product of nearly 120 countries. Any threat to that cash flow from inflation or rising interest rates is a signal to investors that it might be a good time to sell.

Shares traded up about 0.8% in Friday’s premarket, at $130.70 in a 52-week range of $53.15 to $145.09. The consensus price target on the stock is $151.75. Apple’s average daily trading volume is more than 103 million shares.