Apple Passes IBM in Market Cap; Cisco's Next

Apple (AAPL) has attained an incredible market capitalization of $156 billion and has passed up IBM's (IBM) $142 billion market cap. Incredible as Apple's market value has more than doubled in these past 12 months. What's even more remarkable is Apple is still in the early stages of a major product cycle.

Between iPod and iPhone, the global market has barely been scratched. Apple has the quintessential game plan of a razor--razor blade model. On going revenues from the iTunes store supports the iPod owner, as well as iPhone. The iPhone also participates in a revenue sharing arrangement with the exclusive service provider, AT&T (T).

The other piece of momentum in the Apple story is the new Mac computer models supported by the new Leopard operating system. This is the 1st or 2nd inning of a 9 inning game---and this may be a doubleheader.

Monday January 22nd Apple releases the results of its December quarter. Already some analysts are raising the "strong possibility" as one put it, that Apple will probably exceed estimates. The new Mac sales apparently were off the charts so I believe Apple will exceed the $9.3 billion consensus revenue estimate. EPS estimates are for $1.56- 1.59 for the quarter. The whisper circuit is talking about $1.70+.

Whatever the case, numbers are going higher for Apple. I recommended Apple in my book Baby Boomer Investing...Where do we go from here? as one of the 41 stocks I highlight as potential blockbusters for the next 5 years. Apple has not failed to live up to expectations!

Cisco (CSCO) is currently $3 billion larger in market cap---that should end by next week!

Disclosure: Author is long AAPL.

Comments

[rickag:]

Don't get me wrong, while market cap is important, only Apple's revenues are discussed.

Some comparison with IBM's and/or CISCO's revenues might shed some light on the incredible growth of Apple's stock. This might also highlight stockholder's expectations of growth and gross profits between the companies.

2008 Jan 15 10:52 AM

[Tom B:]

I'm waiting for the Big One: Apple passing MSFT.

Old, proprietary systems like Windows worked OK for people in the days when needs were simple-- a little Word Processing, a little EMail-- and when Macs had the appearence of being much more expensive. Today, people are on the web all the time; streaming music and video; creating and sharing music and video; conducting commerce. Windows anemic multitasking and security, and high maintenance requirements, is making that platform seem more outdated every day.

2008 Jan 15 11:01 AM

[John Brown:]

Apple stock is way overvalued in my opinion. ARE IPOD or IPHONE they way of the future? APPLE'S stock price is based on successive new products. When new products stop being innovative their stock will drop like a rock. What is innovative about a rehashed AppleTv or a thin laptop with built in wifi

2008 Jan 15 03:35 PM

[NakoQuant:]

John --

Astute comment. Could I rephrase a bit?

Take 1: (in 2002, with AAPL ~$163/share below its current price) APPLE stock is way overvalued in my opinion. ARE IPOD or MAC they way of the future? APPLE'S stock price is based on successive new products. When new products stop being innovative their stock will drop like a rock. What is innovative about a rehashed OS X or an mp3 walkman like the one creative makes?

Take 2: MICROSOFT stock is way overvalued in my opinion. ARE WINDOWS or OFFICE they way of the future? MICROSOFT'S stock price is based on successive new products. When new products stop being innovative their stock will drop like a rock. What is innovative about a rehashed DOS or a thin game console with built in wifi?

I could have written this about any growth company (exercise for the reader: fill in the blanks for DNA, GSK, NOK, MOT). Are they all overvalued? More to the point, as we are presumably Seeking Alpha here, what do I care about something that might or might not happen in the future? If their innovation pipeline stalls 5 years out, doesn't that mean I can potentially outperform for 5 years until then? And if so, what have you added in your analysis that eventually every company's growth slows?

I also note you didn't include a catalyst for innovation in their products drying up, and therefore I must conclude that your believe is that their stock will drop like a rock when some unforeseen event occurs. Thanks for that, I will apply that logic to the rest of the list, conclude they are all overvalued, and move all my money into T-Bills.

2008 Jan 16 02:08 AM

[jonreagan:]

Minor correction....AAPL's earnings announcement is scheduled for Tuesday, Jan.22nd.

But it does bring up a sore point...three online brokers (including mine) had posted AAPL's earning announcement as being Jan.16th, before changing it to the correct date about 2 weeks ago. Given that options expiration is Jan.19th, this was a fairly significant mistake--if it really was a mistake. I have to believe they sold a lot of call options to people trying to game an earnings announcement.

When I called my broker's HQ in St.Louis, the individual responding quickly admitted the error, and said immediately that they were prohibited from saying anything else about the matter. Here's to "transparency".

2008 Jan 16 12:56 PM