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Steve Jobs was an innovator and a leader who said, "Innovation distinguishes between a leader and a follower." At Apple, Jobs created an environment that fostered innovation with the organization's culture. Before his untimely death in October 2011, Jobs handpicked Tim Cook as his successor. Steve Jobs once said Tim Cook was "not a product guy." However, he chose Cook because of his operational skills and mastery of Apple's supply and manufacturing chain, primarily in China. Meanwhile, Jobs saw something in Cook, who he had worked alongside for years. Tim Cook was eager to "try something different" and willing to take responsibility when it went awry.
After running Apple for a dozen years, the ghost of Steve Jobs remains, but Tim Cook has steered the company to become the most valuable firm.
AAPL’s market cap leads all others
Apple (AAPL) is the world’s largest publicly traded company by market cap.
The chart shows that AAPL leads the way with a roughly $2.75 trillion market cap as of May 8, 2023. Only three companies are worth over $2 billion, and five exceed a trillion-dollar valuation.
Earnings have supported AAPL shares- A huge rally in the Cook era
APPL has done an excellent job managing market earnings expectations. Over the past years, the company has consistently underpromised and over-delivered. Over the past four quarters, AAPL was consistently profitable, beating the estimates for three consecutive earnings reports.
The chart highlights the latest Q1 2023 report, where AAPL EPS came in 8.0 cents or 5.56% above estimates.
When Steve Jobs passed on October 5, 2011, AAPL shares were around the $15 level. Tim Cook had some big shoes to fill, and many market participants did not think he was up to the task. However, the share appreciation over the term of his running the company is a testament to his management skill that would make Steve Jobs proud.
The chart highlights the move from $14.46 at the end of October 2011 to the January 2022 $182.94 all-time peak, 12.65 times the price during the month Steve Jobs died.
A significant comeback after the 2022 correction
Rising interest rates and geopolitical turmoil pushed AAPL shares lower to a $124.17 low in January 2023, a 32% correction from the previous January’s high. Since the January 2023 low, AAPL shares have moved higher in a bullish trend.
The nine-month chart illustrates the pattern of higher lows and higher highs over the past five months, taking AAPL shares over the $170 level. The shares got a boost from the latest Q1 2023 earnings report that beat consensus estimates.
Cash is vital in the current environment- AAPL has lots of cash
The equities market remains shaky as the highest interest rates in years draw investment capital from stocks to bonds. Meanwhile, the potential for a recession, geopolitical turmoil, and record U.S. debt with a debate over increasing the debt ceiling is a challenging cocktail for stocks.
The companies that can weather a volatile storm in equities need two things, earnings and cash. APPL has both, and its cash hoard positions the company to make accretive acquisitions. Failures at SVB and other lending institutions will limit the capital available for emerging companies. Companies with significant cash balances, like APPL, will become critical for funding emerging technologies and profit from their role, replacing the financial institutions.
The reasons for new record highs in AAPL shares
Cash and earnings put AAPL shares in a perfect position to reach new highs and continue its multi-decade path of higher lows and higher highs. It will not be long before the market cap is back over the $3 trillion level, and if history is a guide, AAPL will be the first company to eclipse the $4 and $5 trillion levels.
The bottom line is AAPL is the stock of choice for my two eighteen-month-old granddaughters. Tim Cook has surpassed expectations since he took over from Steve Jobs, and I expect the leadership to continue. Buying AAPL shares on dips could be the optimal strategy for my granddaughters to build wealth for their futures.
On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
