Apple market value hits $500bn

2012-02-29 21:25

New York - Apple's market capitalisation topped $500bn in opening trading on Wednesday, climbing to a mountain peak where few companies have ventured -and none have stayed for long.

Apple was already the world's most valuable company. The gap between it and No 2 Exxon Mobil has widened rapidly in the past month, as investors have digested Apple's report of blow-out holiday-season sales of iPhones and iPads. And, more recently, Apple has raised investors' hopes that it might institute a dividend.

The company's market capitalisation climbed near $508bn as shares rose $8.76, or 1.6%, to $544.17.

On Tuesday, the Cupertino, California, company sent out invites to reporters for an event in San Francisco next Wednesday, apparently to reveal its next iPad model. The launch of the new model was expected around this time, a year after the launch of the iPad 2.

Apple is in rare company. It is the sixth US corporation to reach the $500bn milestone. Exxon, now worth $411bn, was worth just over $500bn for two short stretches at the end of 2007. Apple's arch-nemesis Microsoft was worth just more than $500bn briefly at the end of 1999, and again in early 2000.

It even shot up above $600bn for one day. The company is now worth $267bn.

Cisco Systems, Intel and General Electric also peaked just above $500bn in early 2000. Cisco and Intel are now worth a bit more than $100bn each, while GE is worth $200bn.

Exxon's ascent to the $500bn level was propelled by record oil prices. Cisco, Intel, Microsoft and GE were boosted by the general stock mania of 1999 and 2000, and the hunger for technology stocks in particular.

Apple's rise, by contrast, is powered by its mammoth sales and profits, which are growing at rates unheard of for a company its size. And despite its sky-high market capitalisation, Apple's shares aren't expensive compared to its earnings. It's worth 15 times its earnings for the last year. 

Dividend under consideration

That compares to 21 times earnings for Google and 14 times for the S&P 500 overall. Yet few companies in the index grow their earnings as fast as Apple does: In its latest quarter, its earnings rose 118% from a year ago, to $13.06bn.

Analysts expect the Apple rally to have some legs. The 35 analysts who have reported to FactSet since Apple's latest earnings report have set an average price target of $592 per share, or 8% higher than Wednesday's level.

That implies a market capitalisation of $552bn.

Apple's stock accounts for 3.8% of the value of the S&P 500 index, according to Standard & Poor's, and it made up 6% of the operating income of the 500 companies in the fourth quarter.

Analysts say Apple's sheer size works against its stock price. Apple stock already makes up a large share of the holdings of technology and growth-focused funds, and they have little appetite for more. Meanwhile, value-focused funds are often prevented from buying the shares because the company doesn't pay a dividend.

However, the company has been signalling that a dividend is under consideration, and several analysts now consider it a given that one will be announced this year. Last week, CEO Tim Cook told shareholders at the annual meeting that the company has more money than it needs, and the board and management are thinking "very deeply" about ways to use the cash.

Former CEO Steve Jobs, apparently haunted by the company's lean years in the 90s, had a policy of accumulating cash. The company now sits on $97.6bn.

- AP