Tech&Innovation

Microsoft takes over Apple for Most Valuable Company

Microsoft’s Market Cap

On Friday, Microsoft passed Apple in market cap, cementing it as the most valuable publicly traded company in the world. This is directly caused by Apple failing to meet earnings expectations the day before. Microsoft stood at a market cap of 2.49 trillion USD at market close, while Apple had a market cap of 2.46 trillion USD. 

Causes

Apple reported on Thursday that they missed Wall Street expectations for the fourth quarter due to supply chain constraints. CEO Tim Cook stated that they fell short of the revenue estimate by ~6 billion USD, but even worse supply chain issues are expected in December. iPhone sales grew 47% throughout the past year, but this growth rate still fell short of analyst expectations. 

On the other hand, Microsoft was ahead of expectations, starting with a strong fiscal first quarter. Their revenue has grown ~22% annually. Microsoft has topped Apple before for similar reasons at the start of the coronavirus pandemic with supply chain issues for Apple. With an update to Windows, they closed above a 2 trillion USD market cap in June.

According to equity analyst Sophie Lund-Yates, “Compared to less hardware focused FAANG peers, Apple is also a lot more exposed to supply chain disruption”. This is because Apple is much more focused on selling physical products as opposed to digital services such as the Windows OS by Microsoft or platforms like Facebook and Google. 

History

Apple’s stock market value first overtook Microsoft’s in 2010 with the popularization of the iPhone. In more recent years, the two companies have both had their share as Wall Street’s most valuable business, and Apple had this title since mid-2020. As the holiday season kicks in with warnings of pressure on the supply chain, the performance and stability of Apple is vulnerable in its current state. In contrast, Microsoft is still confident that they can keep up the strong performance with the end of the year. However, they also predict supply-chain problems that will affect products such as Surface laptops and Xbox gaming consoles, which are huge earners for the holiday season. 

Sources:

https://www.reuters.com/technology/apple-set-hand-crown-worlds-most-valuable-company-microsoft-2021-10-29/

https://www.cnbc.com/2021/10/29/microsoft-passes-apple-to-become-the-worlds-most-valuable-company-.html

Categories: Tech&Innovation