Dance of the megacaps: Microsoft over Apple. Again.

From the Wall Street Journal’s “Microsoft Overtakes Apple as Most Valuable Company” posted Friday:

Microsoft Corp. is once again the most valuable company in the U.S., with the software heavyweight’s market cap topping $2.44 trillion Friday morning and surpassing Apple Inc. for the first time in more than a year.

Microsoft’s better-than-expected earnings report earlier this week was the latest catalyst that pushed the stock higher.

Meanwhile, Apple warned on Thursday that supply-chain disruptions are hindering iPhone and other product manufacturing. These issues are expected to bring increased challenges during the important holiday-shopping quarter. Shares fell Friday even as the company logged a record 12-month profit nearing $100 billion.

The last time Microsoft had a bigger market cap than Apple was July 2020, according to Dow Jones Market Data.

Reminder: Market capitalization equals share price times number of shares, and both companies have been buying their own. Apple more aggressively than Microsoft, I believe.

My take: They’ve both good companies.

13 Comments

  1. Robert Paul Leitao said:
    The world is full of great investment opportunities. Apple and Microsoft are both dominant enterprises with mega cap valuations. That’s pretty much where the similarities end. With very little overlap in product and services markets, one should not be viewed as a proxy for how the other “should” be valued. Congratulations to Microsoft’s management team on the successful pivot to a cloud services enterprise and congratulations to Tim Cook and Apple’s management team on a successful September quarter and fiscal year. Supply constraints are transitory and will mostly dissipate over the next nine months.

    5
    October 29, 2021
  2. Gregg Thurman said:
    I wholeheartedly agree Robert. Comparing Apples multiple to that of MSFT is like comparing Toyota to ConAgra.

    Kudos to MSFT’s BoD for selecting Nadella to replace Ballmer. I take a little shine off that because Ballmer should have been replaced at least 6 years earlier.

    2
    October 29, 2021
    • Robert Paul Leitao said:
      @gregg: A Lesson for business students: Soon after the CEO was replaced and decisions weren’t based on “Apple envy,” Microsoft transformed itself into a very successful cloud services enterprise. In other words, obsessing over another enterprise’s success makes it very challenging to find your own pathway to success.

      4
      October 29, 2021
  3. Gregg Thurman said:
    This morning I bought a couple DEC 17 $150 Calls on the dip. AAPL dropped so fast that my $4.00 bid got filled at $3.97 including fees. I then sold OCT 29 (yeah that’s today) $149 Calls against my newly acquired DECs for 21c. Had I waited about an hour I could have got 70c. Oh well, who’d a thunk AAPL would rally that much. Right now they’re trading for 40c and falling. I may have to buy them back and take a very, very small loss on them.

    1
    October 29, 2021
  4. Charles Keller said:
    Since the Capital Return Program has started, AAPL has purchased about 37% of the shares outstanding. That translates to earnings per share coming in about 59% higher than they would have been if the share count had remain unchanged since the first of the buybacks.

    Compounding* this is the increase in net income from about 41 billion to 95 billion over that same time frame. And now there is, in addition to 65 billion in net cash, almost 100 billion in FCF annually? Revenue of a billion a day?

    I wouldn’t panic about MSFT’s market cap or Mark Z’s brave new world. This will work out just fine, me thinks.

    *Read Einstein’s or Ben Franklin’s quotes on the subject of compounding.

    3
    October 29, 2021
  5. Daniel Epstein said:
    Always hard to compare companies stocks with different business attributes etc but for sure the market is valuing MSFT for its business model at a higher rate than Apple even though Apple has larger gross revenues and profit. Apple’s profit ratio is not as high as MSFT so it is not completely wrong. Hardware is not as profitable as software so the mix makes a difference. Still I would give the edge to Apple on a dollar for dollar sales basis. If you are buying Ebita per share Apple is a less expensive stock. Do you think MSFT is growing that much faster than Apple to deserve the premium? Apple tends to grow in spurts so it is not as steady a grower as some would like, I put together a quick compare.
    MSFT Yearly Revenue 168.088B Growth this year 22%
    EPS 8.95 Shares 7.508B
    Market Cap 2.48T EBITDA (TTM) 81.602B
    Ebita / Shares equals 10.88 per share Share Price 330
    Apple Revenue (TTM) 347.155B Growth This year 33%
    EPS (TTM) 5.61 Shares Out 16.406B
    Market Cap 2.449T EBITDA (TTM) 110.935B
    Ebita / Shares equals 6.76 per share Share Price 149

    2
    October 29, 2021
  6. Lalit Jagtap said:
    Apple is busy building our world with best iteration of devices with great sensors. But Wall Street does not care about it, it feels only cloud tech is more important which is also crowded by Google, Amazon, Oracle etc.

    2
    October 29, 2021

Leave a Reply