The world’s most valuable company reached the milestone as investors bet that consumers will continue to shell out top dollar for iPhones, MacBooks, and services such as Apple TV and Apple Music.
Apple Inc (AAPL.O) on Monday became the first company to hit a $3 trillion stock market value, before ending the day a hair below that milestone. As investors bet the iPhone maker will keep launching best-selling products as it explores new markets such as automated cars and virtual reality.
Apple started to pay quarterly dividends and repurchase its shares in March 2012. Since then and through last summer, Apple has spent over $467 billion on buybacks, according to S&P Global Market Intelligence, which calls the iPhone maker the “poster child” for share buybacks.
Share buybacks boost stock a company’s stock price by reducing the supply of shares in the market, effectively returning the money to investors. In addition, reduced share counts increase earnings per share, a metric used by many value-based investors to judge a stock.
On the first day of trading in 2022, the Silicon Valley company’s shares hit an intraday record high of $182.88, putting Apple’s market value just above $3 trillion. The stock ended the session up 2.5% at $182.01, with Apple’s market capitalization at $2.99 trillion.
Shortly after hitting the $3 trillion milestones at around 1:45 PM ET, Apple’s market cap dipped below it again. Apple’s market cap must be above the $3 trillion mark when the market closes at 4 PM ET for it to officially be designated as the first publicly-traded company with that valuation. It ended below $3 trillion on Monday.
What’s Next
Apple’s ability to generate free cash flow could also allow the company to continue its capital return program even when it becomes “net cash neutral”. Which Apple CEO Tim Cook has said means that Apple’s total cash will equal its total debt.
Apple generally updates investors on its shareholder return plans in April alongside its second-quarter financial results. Citi analysts expect Apple to announce another $90 billion in buybacks and to raise its dividend by 10%.
Under Tim Cook, who in 2011 became chief executive following Jobs’ death, Apple has sharply increased its revenue from services like video streaming and music. That helped Apple reduce its reliance on the iPhone to about 52% of total revenue in fiscal 2021 from over 60% in 2018. It pleased investors worried the company relied too much on its top-selling product.
Still, some investors worry Apple is hitting the limits of how much it can expand its user base and how much cash it can squeeze from each user. With no guarantees that future product categories will prove as lucrative as the iPhone.
