Apple’s Market Cap: A Throne Under Siege in the Financial Game

The competition for the highest market capitalization among U.S. publicly traded companies resembles a fascinating episode of Game of Thrones. Recently, Apple (NASDAQ: AAPL) reclaimed its title this summer after two “Magnificent Seven” stocks took it from them earlier this year.

Even with a 12% drop in value since reaching an all-time high at the end of December 2024, Apple currently leads the market with a valuation of $3.4 trillion, approximately $400 billion more than its closest competitor. However, it might not maintain this position through the end of the year, paralleling the unpredictable twists of Game of Thrones.

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Shifting Fortunes: The Apple Scenario

Despite current dominance, Apple may not hold onto its market cap leadership for long. Earlier this year, it sat atop the rankings but was quickly overtaken by two emerging competitors that are now less than 20% behind. A surge in interest surrounding artificial intelligence (AI) could alter the current standings, but let’s focus on Apple for now.

Apple seems fragile despite its stature. Over the past twelve years, the company has exhibited a pattern of significant double-digit growth in fiscal years, followed by two years of modest single-digit increases. Typically, a significant iPhone upgrade drives the growth spurt—yet this expected pattern failed to materialize last year.

Here’s a summary of Apple’s fiscal year revenue growth—ending each September—dating back to 2012:

• 2012: 45%
• 2013: 9%
• 2014: 7%
• 2015: 28%
• 2016: (8%)
• 2017: 6%
• 2018: 16%
• 2019: (2%)
• 2020: 6%
• 2021: 33%
• 2022: 8%
• 2023: (3%)
• 2024: 2%

Currently, revenue growth appears stalled. As of the first quarter of fiscal 2025, Apple has seen 12 consecutive quarters of low single-digit growth, with a considerable number of reports indicating year-over-year declines. The overall compound annual growth rate during this period has only reached 1.5%, failing to keep pace with inflation.

Looking Ahead: Services Over Products?

Despite the ominous outlook, there’s a counter-narrative: Apple is transforming into a services company, which typically enjoys healthier margins. Therefore, it shouldn’t be solely evaluated on revenue stagnation. Still, the compound annual growth rate for earnings from ongoing operations in the past three years stands at a modest 2.4%, also lagging behind inflation.

Several factors contributed to Apple’s disappointing performance last year. The release of the $3,500 Apple Vision Pro headset failed to capture consumer interest, and now reports indicate that Apple has scrapped plans for augmented reality glasses, another potential game changer.

Fiscal 2025 started on shaky ground. Although the iPhone 16 was expected to invigorate Apple’s market position with its AI capabilities, the recent financial update revealed a 1% drop in iPhone sales following its launch.

However, there are silver linings. Consumers might upgrade with Apple’s evolving AI platform. The anticipated iPhone 17 could rejuvenate Apple’s flagship business later this year. Additionally, the Vision Pro headset may have another chance at success if future models come to market at more attractive prices. Analysts predict an uptick in the bottom line over the next two fiscal years, with estimated growth rates of 20% and 12%, respectively.

The challenge lies in Apple’s current valuation. It is trading at a premium of over 30 times its expected earnings for the new fiscal year, which presents a steep multiple considering the slow growth rate. Apple may require a compelling new offering, but its legacy of innovation offers hope for future success.

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*Stock Advisor returns as of February 3, 2025

Rick Munarriz has positions in Apple. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.