Apple looks set to cross US$1 trillion mark

New York

FOR a long time, Apple appeared to be flying solo to a US$1 trillion market value, but Amazon is right at its heels.

Apple, at US$939 billion, remains the highest-valued private company on the global markets - and could well cross the US$1 trillion finish line after it releases its quarterly results on Tuesday.

But Amazon is right behind. On Friday, its market cap reached US$917 billion, before finishing at US$882 billion, thanks to quarterly figures well received by investors.

Google's parent company Alphabet (US$886 billion) and Microsoft (US$827 billion) are also on track, while Facebook (US$505 billion) is out of the race, having shed US$119 billion in value after results released last Thursday.

The biggest traditional economic players - billionaire Warren Buffet's holding company Berkshire-Hathaway (US$492 billion) and bank JPMorgan Chase (US$395 billion) - have been relegated to mere spectators.

According to TDAmeritrade's mid-year review, online commerce giant Amazon's stock was the most popular buy in the first half of 2018, with Apple the second most popular sell.

"The retail trader who is buying that stock is also the same person who is probably an Amazon client," said JJ Kinahan, a chief market strategist for TDAmeritrade. "They see a stock that has plenty of upside and benefitting from the money people have to spend with the economy and the job market improving."

But Apple, which unveils record high after record high when it comes to quarterly results, holds its lead.

Ken Berman, Gorilla Trades strategist, is convinced that Apple will reach the US$1 trillion mark after its Tuesday results, thanks to its range of iPhones, growing interest in the iPad and strength in its services.

"I don't think Apple stock is that expensive," said Nate Thooft of Manulife Asset Management. "The tech sector is the safe haven of the equity market right now."

Analysts insist the situation is a far cry from that in the late 1990s, when several startups exploded on Wall Street - only for the "dot.com" bubble to burst.

"The big problem with the internet bubble was that the majority of businesses did not have revenues, did not have profits, many just responded to a fashion phenomenon," said Gregori Volokhine of Meeschaert Financial Services. "That's not the case with all these companies that today have an essential place in people's lives."

But even in case of economic crisis, the technology sector is in a good place, according to Maris Ogg, founding principal of Tower Bridge Advisors. "If you start to see the economy slowing, if companies have to cut cost, to fire people, they will invest in technologies towards more automation," she said.

For Nicholas Colas of DataTrek Research, it is also hard for investors to evaluate the business strategies with a fairly new business model.

"Equity valuations for Fang (Facebook, Amazon, Netflix and Google) stocks and other internet-enabled business models is a fundamentally new challenge for investors," he said.

"At their core, they are ideas created by a handful of people, developed/maintained by perhaps 10,000 coders, but then used by billions around the world. This is a new phenomenon, and we suspect equity markets do not yet understand what 'correct/normalised' valuations should be." AFP

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