In the financial landscape, companies can quickly lose their coveted positions at the top of the pack. Just look back to 1984 when Exxon, General Motors, and Mobil dominated. Fast forward to today, and their rankings have shifted drastically, with General Motors plummeting to 183rd place. This historical context reminds us how new contenders can arise, fueled by innovation and visionary leadership, challenging established giants.
With this backdrop, let’s examine the trajectories of two tech behemoths – Apple and Meta Platforms (NASDAQ: META). Could Meta, the rising star, potentially outshine Apple in terms of market capitalization by the year 2030?
Image source: Getty Images.
Assessment of the Current Landscape
Presently, Apple commands a market cap of $2.6 trillion, securing its position as America’s second-largest company, trailing only Microsoft. In stark contrast, Meta Platforms boasts a market cap of around $1.3 trillion.
At first glance, Meta’s chances of eclipsing Apple seem slim. However, a deeper analysis reveals subtle shifts underway.
The Cash Flow Conundrum
Long-term sustainability and value creation are often epitomized by free cash flow per share, a pinnacle financial metric according to Amazon’s Jeff Bezos.
This metric signifies the shareholder value a company generates. It empowers management to reward shareholders through various channels, including dividends and share buybacks.
Comparing Meta and Apple’s Performances
How do Meta and Apple measure up in this regard? Let’s delve into charts reflecting their free cash flow per share and stock price trajectories over the past decade.
AAPL data by YCharts.
In essence, Apple’s stock has outpaced its free cash flow per share growth, signifying overperformance. Conversely, Meta has lagged behind in this aspect, showcasing underperformance.
Moreover, comparing their growth rates reveals a stark contrast. While Meta escalated its free cash flow per share by over 1,200% in the past decade, Apple achieved a modest 252% growth.
In essence, this disparity indicates Apple’s overvaluation concerning Meta, suggesting an eventual alignment of stock prices with free cash flows. Meta’s stock is poised to appreciate to align with its cash flow, while Apple’s stock is expected to gradually adjust downwards.
While factors like Apple’s enhanced free cash flow or Meta’s potential decrease in cash flow could alter this narrative, if current trends persist, Meta could indeed surpass Apple’s market cap in a decade or sooner.
In the last 12 months alone, Meta’s market cap surged by over 140%, soaring from $532 billion to $1.3 trillion. In stark contrast, Apple’s market cap remains nearly unchanged.
AAPL Market Cap data by YCharts.
This shift is underway, and with free cash flow per share acting as the silent orchestrator, Meta’s ascent to surpass Apple may be closer than anticipated.
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John Mackey, former CEO of Whole Foods Market and now part of Amazon, sits on The Motley Fool’s board. Randi Zuckerberg, former Facebook executive and sister to Meta Platforms CEO Mark Zuckerberg, also serves on The Motley Fool’s board. Jake Lerch holds positions in Amazon. The Motley Fool has positions in and endorses Amazon, Apple, Meta Platforms, and Microsoft. Additionally, The Motley Fool suggests General Motors and provides options recommendations for each. The Motley Fool adheres to a strict disclosure policy.
Opinions expressed here are solely those of the author and do not necessarily reflect the views of Nasdaq, Inc.
