Jean-Louis Gassée on Apple’s second trillion

“No tree grows to the sky.”

From “Apple’s Best Times Are Behind It. For Real This Time!” posted Sunday on the Monday Note.

Against common wisdom, against difficult odds, Apple rose to the very top of the tech industry. Now that they’ve become the first company to be valued at $2T, they’re certain to fall. Or maybe not…

Even as Jobs’ historic Apple 2.0 turnaround launched the company towards new heights with a string of successes — the iPod, the Intel Macs, the iPhone and the iPad — the doomsayers weren’t deterred. Each new high was an opportunity to declare peak Apple, it’s all downhill from here.

This brings us to the latest highest of highs. At last week’s close, AAPL was trading for $497/share, giving the company a market capitalization of $2.1T… that’s T as in trillion. Clearly, the skeptics say, this is unsustainable, no tree grows to the sky, the larger a company becomes the more difficult it is to sustain growth. That’s what many, yours truly included, thought when Apple became the first company to cross the $1T market cap line in August 2018. And yet the company has achieved the inconceivable and doubled its value in exactly 24 months…

As Bill Gates recently said, referring to Apple and other companies of its size:

“If you are as successful as I am, or any of those people are, you deserve rude, unfair, tough questions. The government deserves to have shots at you. That type of grilling comes with the super successful territory, it’s fine.”

My take: The doomsayers will not be deterred. Doesn’t mean the stock won’t go down.

14 Comments

  1. Michael Goldfeder said:
    I just read that Microsoft has now jumped into the fray and submitted a declaration from one of their engineers in the Epic v. App Store lawsuit. Saying that Apple’s actions will cripple the “Unreal Engine” and harm game developers. My prediction is that the Federal Judge will deny Epic any TRO Injunctive relief being sought by Epic, as they did in fact self create their own emergency out of their own misconduct. They will not be rewarded for those antics.

    Apparently, Microsoft has boundless animosity toward Apple as they even had their VP and General Counsel working with Congress ahead of Apple’s appearance before the Judiciary Committee.

    Microsoft needs to mind their own house as it relates to their cloud services contracts and claims being launched against them by Amazon and their AWS Unit.

    4
    August 23, 2020
  2. Steven Philips said:
    Gates, Microsoft – hypocritical. What else is new ?

    3
    August 23, 2020
  3. Gregg Thurman said:
    One trick ponies stop growing when they have grazed all there is to graze.

    Apple used to be a one trick pony, but stopped being so when Jobs returned. To quote Steve: “Apple is going the be the Sony of consumer electronics”. And that they have.

    Apple’s stable first added the iPod, then incorporated it into the iPhone, then added the iTunes Music Store (to become Apple Music), added video to iTMS (later to become Apple TV+), added iPad, Apple Watch, Apple Pay, Apple Card, a compelling Health initiative, Air Pods, a whole bunch of tools to make them all work together, and a whole bunch of tools to aide developers. Then for good measure they protected the consumer’s privacy and virtually eliminated consumer fears of bad actors.

    By my count (incomplete as it is) Apple’s stable now includes at least TEN ponies in its stable, each with its own pasture, most with plenty of room for lots more grazing.

    The only thing holding back Apple’s growth is government regulation. Three Trillion valuation? Absolutely, I just can’t say when, but I don’t think it’s going to take another 2 years.

    4
    August 23, 2020
    • Fred Stein said:
      Yes. Apple’s intrinsic strengths support the current valuation and upside.

      Regulation, geopolitics, other externalities may have impact at some time, but not for any great length of time.

      0
      August 23, 2020
  4. Ralph McDarmont said:
    Any longtime AAPL investor knows the deniers are insane. And/Or trying to manipulate the market. Apple is a hugely successful company delivering great products and services. Nobody knows what is coming next from Apple. But I do know this: whatever that is the pipeline will be traditionally amazing, and generously rewarding to stock holders. I B Apple long since 1994. Ouch!

    1
    August 23, 2020
  5. Jerry Doyle said:
    I say the following with deep conviction and with fervent sincerity following Mother Teresa’s 15 step advice for helping one to become more humble: Apple’s best day’s lies ahead. It’s not about me and my accumulating more wealth. It is about Apple changing the world for the better. It is going to be exciting. My request is the omniscient Lord gives me additional years with the physical, mental and emotional capacity to experience fully what yet is to come. Have a blessed Apple week.

    1
    August 23, 2020
  6. Bart Yee said:
    Reading further in, Gassee’s article is actually a lot more optimistic than the headline or snippet suggests:
    Sub-headline:
    “Against common wisdom, against difficult odds, Apple rose to the very top of the tech industry. Now that they’ve become the first company to be valued at $2T, they’re certain to fall. Or maybe not.”

    After a discussion of product revenue distribution and pipeline products:
    “There’s a good chance that some of this is misinformed or simply wishful thinking (AirTags, especially), but it paints a picture of revenue contributions that belie the Best Days Are Over refrain.

    Returning to AAPL’s historic pinnacle, let’s recall Warren Buffett’s saying: In the short-run, the stock market is a voting machine; in the long-run, it’s a weighing machine. The Sage of Omaha must be pretty happy with the 250M shares of Apple stock he started accumulating in 2016, now worth about $118B. Buffett’s vote for Apple weighs a lot more than the vaticinations of web carnival barkers.

    After four stock splits (there’ll be another this Monday), a single share of AAPL at the 1980 IPO price ($22) would be worth $27,859 today. That’s a 126,631% gain. Impressive…but Microsoft did even better with its own IPO, six years after Apple’s. By December 2019, MSFT had yielded a 211,000% gain.

    Perhaps there is room left in Apple’s upward trajectory.”

    4
    August 23, 2020
  7. Bart Yee said:
    And Aug. 24, 2020 4:33am premarket says AAPL up $8.89 to $506.37. Oops, 4:38am, up $9.03 to $506.61. It’s going to be an interesting morning

    I guess there’s still some market interest in little ‘ole AAPL.

    0
    August 24, 2020
    • Bart Yee said:
      Its gonna be hard to keep up with the premarket this morning. As of 5:07am, Last: $507.94, up $10.46.

      0
      August 24, 2020
  8. Peter Kropf said:
    Whoops. Apple crashing to $506.58 at 6:12 AM.

    0
    August 24, 2020
    • Bart Yee said:
      He’s up, He’s down, He’s up again! (in best Howard Cosell imitation).

      0
      August 24, 2020

Leave a Reply