There is no innovation. It is a rhetoric of the press that poured into Apple every time. And Apple surpassed the market cap of 2 trillion dollars on the 19th of August. It has been two years since it exceeded the $1 trillion mark. How did Apple, which said there was no innovation, became a company with a market cap of over 2 trillion? Experts pay attention to the Corona 19 situation and Apple’s service ecosystem-oriented business.
On the morning of the 19th, Apple surpassed $2 trillion in market capitalization with an intraday increase of 1.4% to $468.65 per share. Based on the closing price, the market closed with a market cap of $ 1.97 trillion. This is the first US listed company to exceed the market cap of 2 trillion dollars. Apple surpassed $1 trillion in market cap on August 2, 2018.
Tim Cook, CEO of Apple (Photo = Apple)
Market cap doubles in one week… The background is Corona 19?
Apple took 42 years to reach a market cap of $1 trillion, but only two years to reach $2 trillion. Also, the actual time it took to get to the $1 trillion to $2 trillion mark is only 21 weeks. Apple’s market cap fell below $1 trillion in mid-March, when the Corona 19 crisis was in full swing.
The reason why Apple’s market capitalization could rise so steeply is the Corona 19 incident. The U.S. stock market plunged early this year as the Corona 19 crisis intensified, but as the U.S. central bank, the Federal Reserve System (FED), launched an aggressive quantitative easing policy to loosen money in the market, including unlimited purchases of bonds, Apple, Google (alphabet), Money was rushing to tech giants such as Microsoft and Amazon, and their stock prices soared.
Investors are citing IT companies as the beneficiaries of Corona 19. As the non-face-to-face culture expands due to Corona 19 and the dependence on IT technology increases, the influence of the company is increasing, and analysts say that investors are flocking to such a safe place in the economic downturn. Five companies, including Apple, Google (Alphabet), Microsoft, Facebook, and Amazon, are currently worth about $3 trillion. It is equivalent to the combined values of all of these next 50 companies included in the S&P500 Index.
The New York Times stated, “Investors are pouring billions of dollars on them, hoping that a tech giant with enormous scale and power will serve as a refuge in the recession caused by the Corona 19 pandemic.” .
Apple builds a service-oriented zone
Apple’s stable business structure is also drawing attention. Even in the aftermath of Corona 19, Apple recorded the highest quarterly performance ever in the second quarter of this year (the third quarter of the US fiscal year). It recorded 59.6 billion dollars (about 71 trillion won), an increase of 11% from the previous quarter. In particular, the growth of the service sector increased sharply. Service business sales rose 15% year-on-year to $13.16 billion (about 15,588 billion won).
Apple is using service as a new growth engine. Apple has been trying to expand the service ecosystem based on the iPhone sold, considering that there is a limit to expanding sales in the recently stagnant smartphone market. It is calculated that in the oversaturated smartphone market, the iPhone business alone can no longer eat. It is a structure in which the iPhone is misused and makes profits through the service.
Apple continues to strengthen subscription services such as Apple Music (music streaming), Apple Arcade (game), Apple TV Plus (video OTT), and Apple News Plus (news provided). Apple CEO Tim Cook emphasizes the integration of hardware, software, and services, and is generating stable revenue through a strategy that locks users into the Apple ecosystem. That’s why it grows every year despite criticism that Apple has no innovation.
The butterfly effect of Trump’s tax reform
Some analysts say that the Trump administration’s tax reform in 2017 contributed to the rise of Apple’s stock price. U.S. President Donald Trump lowered the highest corporate tax rate from 35% to 21% while implementing tax reform at the end of 2017, and introduced a one-time tax return to the homeland when U.S. companies repatriate profits stored abroad. Introduced.
In the past, the U.S. government has levied corporate tax not only on domestic companies’ U.S. revenues but also on revenues made abroad. Taxes were deferred until they were brought back to their home countries, and U.S. companies have stockpiled profits overseas to postpone taxation. The Trump administration shifted to subjugation that only taxed money earned in the United States, introducing a repatriation tax of only 15.5%, which is lower than the corporate tax rate (21%), and companies brought overseas retained earnings to the United States.