Apple (NASDAQ: AAPL) recently reclaimed its position as the most valuable company globally, boasting a market cap of $3.57 billion. Its stock surged by over 60% in the past three years, despite facing challenges from a softening iPhone market and increased competition.
Looking ahead from fiscal 2023 to fiscal 2026, analysts project Apple’s revenue and earnings per share (EPS) to grow at compound annual growth rates (CAGRs) of 5% and 10%, respectively. These growth forecasts hinge on a resurgence in iPhone sales, expansion into emerging markets like India, and the maturation of Apple’s subscription ecosystem with over a billion subscribers. Additionally, Apple’s ongoing share repurchase programs are expected to bolster its EPS.
Image source: Apple.
While Apple’s growth prospects are solid, its current valuation metrics, trading at 35 times forward earnings and 9 times sales, may be deemed inflated. Speculations surrounding Apple’s generative AI strategies for its first-party apps might have artificially boosted its valuations. Even if Apple meets market expectations and sustains its price-to-sales ratio by fiscal 2026, its market cap could rise modestly to $4.01 billion by the final year.
Despite Apple’s continued dominance, I anticipate that three of its trillion-dollar peers – Nvidia (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) – might surpass its valuation in the next three years.
The Diverse Business Models of Tech Titans
Apple, Nvidia, Microsoft, and Alphabet operate distinct business models. Apple heavily relies on iPhone sales and services for revenue growth. Nvidia specializes in high-end data center solutions for AI processing. Microsoft thrives on its cloud offerings like Azure, Office 365, and Dynamics. Alphabet’s primary revenue source is Google’s advertising, with its cloud business showing accelerated growth.
All four companies are expanding their generative AI capabilities. Apple has recently integrated OpenAI’s ChatGPT into its apps, Microsoft leverages OpenAI’s tools in its cloud services, and Alphabet continually enhances its Gemini generative AI platform. Nvidia, by providing essential AI infrastructure, capitalizes on the AI boom.
Alternative Growth Trajectories
Of the four companies, only Apple heavily relies on slower-growing consumer electronics. Nvidia excels in high-growth chip manufacturing, Microsoft leads in cloud and AI, and Alphabet dominates digital advertising. Analysts foresee faster growth rates for the latter three companies compared to Apple over the upcoming three years.
|
Company |
Estimated Revenue CAGR (Next 3 Fiscal Years) |
Estimated EPS CAGR (Next 3 Fiscal Years) |
Current Market Capitalization |
Price-to-Sales Ratio (Forward) |
|---|---|---|---|---|
|
Apple |
5% |
10% |
$3.57 billion |
9 |
|
Nvidia |
46% |
53% |
$3.26 billion |
28 |
|
Microsoft |
15% |
17% |
$3.47 billion |
14 |
|
Alphabet |
11% |
20% |
$2.37 billion |
7 |
Data source: MarketScreener.
If these projections materialize and price-to-sales ratios remain stable, Nvidia could achieve a market cap of $5.3 trillion by fiscal 2027, Microsoft at $4.5 trillion by fiscal 2026, and Alphabet reaching $3 trillion. Notably, Alphabet’s valuation could near $6 trillion with similar price-to-sales ratios as Microsoft. Therefore, these tech giants have a strong chance of outstripping Apple’s market cap in the near future.
Peering Beyond Market Caps
While tracking market cap shifts is intriguing, it often simplifies the intricate strengths and vulnerabilities of these corporate giants.
All four of these “Magnificent Seven” tech entities are poised for sustained growth. Apple excels in the mobile computing sector, Microsoft and Google are transitioning into dominant cloud and AI players, and Nvidia remains a leading force in AI chip technology. Instead of fixating on future market cap standings, investors should focus on each company’s ecosystem expansion, competitive advantages,
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