Momentous Market Cap

Apple briefly kissed an intraday market value of $3 trillion early this afternoon, before shares pulled back slightly by the close. It’s the first company to boast a market cap above that massive, but  largely symbolic level.

"This is an astonishing figure, considering based on a market capitalization for the entire S&P 500 index of $38.74 trillion, Apple shares now represent approximately 8% of this highly followed benchmark," wrote Daniel Morgan, a senior portfolio manager at Synovus Trust Company, in an email today.

The milestone comes less than a year and a half since crossing the $2 trillion level and less than four years after hitting $1 trillion.

The latest leg of Apple stock’s multi-year rally has come as demand for the iPhone 13 lineup exceeded expectations. Despite being a largely incremental update to the iPhone 12, the newest lineup has been a hit with consumers. Wall Street analysts have lifted their estimates for sales in the next few quarters and gotten more bullish on Apple stock, helping lift shares higher.

Apple's fast-growing services business has also been a key to the company's furious market cap growth. Investors and analysts like recurring revenue software business. The marginal cost of goods sold is minimal, and subscriptions give plenty of visibility into future results. That merits a higher price-to-earnings multiple than a potentially more cyclical hardware-only business.

Here's Wedbush Securities' technology analyst Daniel Ives writing to clients today:

Hitting $3 trillion is another historical moment for Apple as the company continues to prove the doubters wrong with the renaissance of growth story playing out in Cupertino. The linchpin to Apple's valuation re-rating remains its services business, which we believe is worth $1.5 trillion in the eyes of the Street, coupled by its flagship hardware ecosystem, which is in the midst of its strongest product cycle in over a decade led by iPhone 13.

The services business is further monetizing the Apple golden installed base and poised to reach $100 billion + annual revenue by 2024.

Apple stock trades for just over 30 times expected earnings over the coming year. That's a pricier multiple than the shares have commanded lately—their five-year average is 19.6 times forward earnings.

And Apple has a lot of earnings that just keep growing year after year. Net income came in at a whopping $94.7 billion in the company's latest fiscal year, which ends in September, on $365.8 billion in sales. Those figures have compounded at 16% and 11% annually over the past five years. Earnings per share have grown even faster—22% a year—thanks to Apple's generous share buyback program.

Not too far behind Apple in the market cap derby is Microsoft, worth about $2.6 trillion. Alphabet, Amazon.com, and Tesla are next in line, all with valuations north of $1 trillion.

For more analysis and mind-boggling stats on Apple's business and stock, read a report from Eric Savitz here.