Apple is the first publicly traded company to ever be valued over $1 trillion. It has a ‘market cap’ of $1 trillion. Google and Amazon are close behind at just under $900 billion each.
What is a trillion? 1 with 12 zeros!
This brings us to the ‘market cap’. What is it? The Market Capitalization or ‘market cap’ of a company is the market value of a company or the value of a company as estimated by the market.
For Example, if a public company has issued a total of a 100 shares and you own 1 share, you effectively own 1/100 or 1% of the company. These shares can be bought and sold on the stock exchange. Let us say the market price on the stock exchange for 1 share is $10. The person buying this one share for $10 is directly buying 1% of the company for $10. If he bought all 100 shares of the company at this market price of $10, he or she would have to pay $1,000. So the market value for 1 share is $10 but the implied market value or the market cap of the entire company is $1,000.
You will find more infographics at Statista
Apple: Apple has just under 5 billion shares outstanding. Each share currently trades for just over $200/share, or $200 per share. So if someone was to buy all the shares of Apple, i.e. the entire company, he would have to pay a $1 trillion. This is the market cap of Apple.
How does someone decide if a company should be worth $1tn or $1bn is a longer and more complicated conversation but the short version is it is the potential of the company to deliver on revenue and profits.
Apple’s revenues (sales) in 2017 were $229 billion and their income (sales – expenses) were $52 billion. The potential of Apple’s shares is decided by us depending on what we feel about their new product launches, their ability to keep selling the regular products, their ability to ward off competition amongst other things.
Written By: Anant Jalan