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Apple joins exclusive $500bn club

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Apple has joined an elite group of companies to reach a $500bn equity valuation amid expectations it is to launch a new version of the iPad next week.

Shares in the iPhone maker rose by nearly 2 per cent to $535.41 on Tuesday, lifting its equity value to $504bn. Apple shares are already up 32 per cent this year, extending gains over the past 10 years to 4,500 per cent.
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Apple is the world’s most valuable company – valued at about $90bn more than ExxonMobil – and stock market analysts remain bullish. Of 56 analysts tracking Apple to be surveyed by Bloomberg, 51 rate the stock a “buy” with four maintaining a “hold” stance. Only one has a “sell” rating.

The bout of optimism has been fuelled by expectations that an iPad will be launched at a media event that Apple has called for next Wednesday and by speculation that the company could pay its first dividend. The new iPad is expected to cement Apple’s lead in the new category of touchscreen tablet computers it created, with technical advances that include a higher resolution screen, faster chips and, possibly, a connection to the latest high-speed 4G networks.

Tim Cook, chief executive, told Apple’s annual meeting last week that the board was “thinking very deeply” about what to do with its cash reserves. Apple’s cash topped $97bn at the end of last year and would have surged past $100bn based on rates of cash generation.

Unlike market capitalisation, which is based only on the number of a company’s shares in issue, equity value includes options and other instruments likely to be turned into stock in future, presenting a truer ­picture of a company’s stock market value.

Apple’s market capitalisation is now $499bn. This is close to the combined value of the last three technology companies that came close to, or surpassed, the $500bn market capitalisation – Microsoft (now $266bn), Intel ($136bn) and Cisco ($109bn). Those three reached their peak valuations in the dotcom boom years of 1999 and 2000, with Microsoft surpassing $600bn in 2000 – a record unmatched. ExxonMobil and General Electric are the only others to pass $500bn.

Apple has added $175bn to its value in the space of a year, but still trades on a price to earnings ratio of 11 based on Wall Street estimates for 2012 fiscal year earnings, says FactSet.