What’s the Significance of Apple’s $1 Trillion Valuation? More Than You Realize

The headlines will be forgotten, but the mental 'reset' of what's possible will linger

Apple Stock Is Still One of the Best Long-Term Picks Out There

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On the off chance you just got back from a mission to Mars or just woke up from a long cryogenic sleep, consumer technology company Apple Inc. (NASDAQ:AAPL) is a $1 trillion behemoth. Thanks to Thursday’s near-3% gain from AAPL stock, the organization’s market cap finally eclipsed the long-watched milestone.

The media was abuzz, of course, as were investors. For shareholders and the company’s employees, however, Friday was still just another workday. CEO Tim Cook and everyone else continues to do whatever they can to beef up the top and bottom lines, and the financial news pundits have moved on to other things (and rightfully so).

While it may be back to business-as-usual for the company, the achievement still creates a subtle ripple effect that extends well beyond Apple itself. In particular, there are three noteworthy changes that are worth embracing.

Other Companies Can Now Freely Do the Same

For the longest time, speculation circulated that Amazon.com (NASDAQ:AMZN), rather than Apple, might actually be the first organization to reach the $1 trillion mark. Amazon is still in the running for the second trillion-dollar company, and a handful of companies aren’t too far behind it.

For better or worse, their moves above a $1 trillion valuation won’t get as much media attention. That means there won’t be any artificial, news-driven, hope-driven or fear-driven factors in play that might hold other companies back from doing the same … or imploding once they do. It won’t be big news again.

Don’t believe future moves into the $1 trillion club will go far less noticed? Try out this litmus test: Who was the first person to run a four-minute mile? Most everyone knows it was Roger Bannister. Practically nobody can name any of the three runners who performed the same equally amazing feat within a year of Bannister’s record-breaking run.

The Psychological Underpinnings Now Go Away

Perhaps it’s an extension of the first outcome of moving past the big milestone, but now that investors have seen it happen, there may not be a subconscious, artificial desire in play that helped push the market’s first company over the trillion-dollar hump. Conversely, there’s also not an overhang of fear that merely getting there sets AAPL stock up for a sudden and sizeable wave of profit-taking. Apple held onto its new valuation with a pretty firm grip on Thursday.

It matters.

Perhaps in ways most don’t even realize, the sheer amount of press coverage Apple has garnered of late has prodded investors into drawing conclusions about Apple they may have had no intention of making. From here any analysis of the organization can again be about iPhones and margins and all the other things that really drive AAPL stock higher or lower.

It Proves Mega-Enterprises Can Be Managed

Arguably above all else, Apple’s massive size (which by the way is matched by its massive revenue and massive earnings) verifies that gigantic companies aren’t inherently too big for their own good.

For years companies like Apple have been panned by alarmists who are concerned that too much size is a recipe for disaster, one way or another. Banks were deemed “too big to fail” in 2008, and investors only have to look at General Electric (NYSE:GE) to appreciate that its sheer size, once a benefit, largely contributed to its recent undoing. In 2013, JPMorgan recognized long before anybody else that International Business Machines (NYSE:IBM) was too big to get out of its own way.

Take a closer look at those case studies, though. While their size certainly didn’t make them easy to manage, it was poor leadership and misguided product development — and maybe too much diversification — that proved to be the root of their problems.

Apple doesn’t have that problem. Indeed, Apple is hyper-focused on one thing: making it easy to make iOS the centerpiece of your digital life. The fact that it’s become a giant really just by doing that one thing is actually a testament to the power of focus.

Bottom Line for AAPL Stock

As for Apple, none of this is to suggest AAPL stock won’t hit a headwind sooner or later that will drag the company’s market cap back below the $1 trillion mark. It’s almost certain that will happen … eventually.

It just doesn’t matter. Apple is going to keep on growing for the foreseeable future, regardless of its market cap. If it was a good investment two days ago before it was a trillion-dollar company, then it still is now that it’s at a new stunning size.

Whatever the case, investors of all companies can thank Apple for reshaping assumptions about limits and norms. It may have been these misperceptions — these psychological hurdles — more than anything else that were holding investors and other companies back. It’s hard to be first. It’s much easier to be second, and even easier to be third.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.


Article printed from InvestorPlace Media, https://investorplace.com/2018/08/whats-the-significance-of-apples-1-trillion-valuation-more-than-you-realize/.

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