Apple stock rallied in the after-hours trading on Tuesday in response to the company’s super strong fiscal third-quarter (April-June) results. Its profits soared more than 30% to $11.5 billion or $2.34 per share, beating Wall Street estimates of $2.18 per share. In response, the stock surged 3.67% in after-hours trading Tuesday to $197.28.
Apple stock flirts with the trillion dollar valuation
Apple is now closer to $1 trillion market cap than it ever was. Now it only needs to go above $203.5 per share to hit the 12 zero milestone. According to Nasdaq, Apple has 4,915,138,000 outstanding shares. It will hit the $1 trillion market cap when the stock price reaches $203.5 per share ($203.5 * 4,915,138,000 = $1.00023 trillion). That milestone is well within Apple’s reach considering the company issued strong guidance for the current quarter.
The April-June quarter is traditionally not so strong for Apple as consumers wait for the next-gen iPhones, but this time it was an exception. The tech giant told investors that its Q3 revenues skyrocketed 17% YoY to $53.3 billion on the back of iPhone X, subscription services, and wearable devices. According to Yahoo Finance, Wall Street analysts were expecting revenues of $52.3 billion. Tim Cook said it was “Apple’s best June quarter ever.”
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The tech giant is preparing to launch three new iPhones this September. At least one of which will cost $1,000 or above, and another will lure buyers with an affordable $600-$800 price tag while offering iPhone X-like design and Face ID. Even if Apple misses the $1 trillion market cap mark over the next few days, it could reach that milestone when new iPhones come out. Tim Cook said he was “very excited about the products and services in our pipeline.”
Everything is good, but Macs and iPads disappoint
The tech giant sold 41.3 million iPhones during the latest quarter, slightly below analysts’ projection of 41.8 million units. Revenues were strong despite lower than expected sales, thanks to the ridiculously high price of iPhone X, which remains the most popular iPhone. The average selling price (ASP) for iPhones was $724 in the April-June period, up from $606 in the same quarter a year ago. The iPhone ASP was $728 in the January-March quarter. It gives Apple a good reason to launch more expensive iPhones.
Revenues from services operations – including the App Store, iCloud, and Apple Music – jumped 31% $9.5 billion. The iPad unit sales rose 1.1% to 11.6 million units, but iPad revenues declined 4.6% to $4.7 billion. The iPad Pro has breathed new life in the otherwise weakening iPad lineup. Mac unit sales plunged 13% to 3.7 million units while revenues went down 4.7% to 5.3 billion. MacBook buyers have been complaining about a lot of issues including the keyboards.
The “Other” category, which includes revenues from Apple Watch, AirPods, Beats, HomePod, and other products, skyrocketed 37% YoY to $3.7 billion. Tim Cook noted that the Apple Watch sales were up “in the mid-40 percent range.” Recently, Canalys reported that the Apple Watch shipments jumped 30% YoY in the April-June quarter. Apple remains the global leader in the smartwatch segment with more than 34% market share.
The iPhone maker also issued strong guidance for the July-September quarter, which would get a boost from new iPhone launches in September. For the fiscal fourth quarter, the Cupertino company projected revenues of $60 billion to $62 billion, beating analysts’ expectations of $59.6 billion.
What does hitting the $1 trillion market cap mean for Apple?
There is a good chance Apple would touch the psychological milestone of $1 trillion market cap, but it’s not the only company near that figure. Amazon, which has enjoyed more than 50% gains this year, is close behind with a market cap of $880 billion. Wall Street analysts remain bullish on Amazon. Google’s parent company Alphabet also has a market value of $884 billion. Another technology heavyweight Microsoft is close behind with a market value of $847 billion.
Frankly, the $1 trillion market cap milestone won’t change anything fundamentally for Apple or the other companies. Shareholders won’t get more dividends than when the tech giant’s valuation was $999.99 billion. The trillion dollar is just a number. Nothing much would change fundamentally.
To put things in perspective, Microsoft was valued at $613 billion at the peak of the dot-com bubble in 1999. That’s $927 billion adjusted for inflation today. Right before the tech bubble burst in March 2000, Wall Street analysts were expecting Microsoft and Cisco stocks to surpass the trillion dollar valuation. It’s been 18 years since then, and the two companies are yet reached that milestone.