On Thursday, Apple became the first $1 trillion U.S. corporation. (STR/AFP/Getty Images)
Reporter

I remember learning in grammar school that the first $1 billion U.S. corporation was U.S. Steel Corp. It was formed in 1901, when banker J.P. Morgan merged Andrew Carnegie’s steel company with Elbert H. Gary’s Federal Steel and William Henry Moore’s National Steel.

Apple became the first $1 trillion publicly traded U.S. corporation 117 years later, at 11:48:04 Eastern Standard Time on Thursday.

One trillion is a big number.

If Apple sold itself for $1 trillion in cash, the money would be enough to buy all the goods and services produced in Indonesia — population 261 million — in 2017.

Apple is bigger than the economies of about 174 countries, including Turkey, the Netherlands, Saudi Arabia and Switzerland.

For the present, at least, Apple stands at the height of a communications revolution. Like its technology brethren — Amazon.com, Google, Netflix, Facebook — it plays a dominant role in people’s daily lives. Its share of the worldwide smartphone market is 12.1 percent. Rival Samsung has a 20.9 percent share, and Huawei has 15.8 percent.

“This $1 trillion market cap is a milestone on the way higher,” said Charlie Toole, portfolio manager with Adviser Investments. “Apple can continue to grow and continue to innovate and sell its iPhone.”

Its iPhone catapulted Apple into the spot as the largest company by market value in the Standard & Poor’s 500-stock market. It’s quite an achievement, but it’s still less of a percentage of that group than IBM was in the early 1980s or what Microsoft was in 2000.

“You need to interpret the size of Apple relative to its peers and the global economy,” said Howard Silverblatt, a senior index analyst with S&P Dow Jones Indices. “In that case, Apple is much smaller than the peers of the early 1980s, such as IBM, Exxon and Microsoft in the 1990s.

“It is not as high a percentage of the S&P 500 as other companies have been historically,” Silverblatt said.

The $1 trillion mark is eye-popping, but Apple might be worth even more.

“The market is struggling with how much to pay, but it knows it can’t pay this little, given the fact this is a consumer products company,” CNBC’s Jim Cramer said on the business news channel Thursday.

“Should [Apple] get a 25 multiple like Clorox? I would think people would think that’s fanciful because the number is so high,” Cramer said. “So maybe we should put a 20 multiple” on Apple, he said.

A price-to-earnings multiple of 20 would mean an Apple share price of $242 — which would raise its value to more than $1.1 trillion.

Chris Brightman, chief investment officer of Research Affiliates, an institutional investor with more than $200 billion under management, said Apple’s powerhouse profitability makes it worth the money.

“Apple’s huge market price is supported by correspondingly huge profits,” Brightman said. “Some companies are priced by the market on hopes and dreams of future profits. Amazon is the poster child there. You have other companies that don’t make any money at all. Like Tesla.

“Apple is not at all in that category,” Brightman said. “What’s remarkable about Apple is not so much its stock price as the amount of money that it makes. If it delivers close to those profits, its stock price is fairly valued or even cheap.

“Apple is trading at only 15 times next year’s estimated earnings,” Brightman said. “For reference, Google trades at 25 times earnings and Amazon 70 times.”

Other tech giants are close behind in the climb to $1 trillion. Amazon (founded by Washington Post owner Jeffrey P. Bezos), which many thought would get there first, is about $116 billion back, at $884 billion. Google parent Alphabet was worth $854 billion on Thursday, and 43-year-old tech granddaddy Microsoft is at $824 billion.

Many of us have gotten wealthier off Apple, many without even knowing it because the stock is buried in their pension fund or mutual fund.

If you invested $10,000 in Apple when it first sold publicly traded stock at its initial public offering price of $22 in December 1980, it would now be worth around $6.3 million, including reinvested dividends.

And if you bought $1,000 worth of Apple a decade ago, it would be worth more than $9,000 today — a “nine-bagger,” in Wall Street parlance.

But there is also the potential for a steep downside.

“If Apple tumbles, it’s going to hurt,” Silverblatt said. “Apple is a volatile stock, just the way IBM was in the mid-’80s. Anything that size that moves quickly will impact the markets. If Apple is down 10 percent, you are going to see so much crying. Your headline will be, ‘$100 billion in market value vaporized.’ ”

Unlike one-dimensional corporate giants of the past, the Apples and Amazons of the world are part of American lives, earning fortunes from the various ways people touch their products every day, from phone calls to book purchases, from listening to music to ordering food or reading a newspaper.

“These companies create an ecosystem of products that become a fabric of your life,” Piper Jaffray’s Michael Olson said. “And that could be anything from communications from other people to shopping to payments to entertainment. The other companies [from the past] were huge companies that were very important in certain industries but didn’t transcend different components of a consumer’s life.”

“The speed of growth, from the introduction of the iPhone in 2007 to today, where it is considered a basic necessity for day-to-day living, is amazing,” Silverblatt said. “It speaks to the accelerated pace of technology and the impact of technology-dominated advances on the market.”

Companies come and go. History is littered with the names of corporate giants that succumbed to rising competitors. Anyone remember Montgomery Ward? How about Westinghouse? Even Eastman Kodak or Sears, Roebuck & Co.?

“There’s a lot of risks on the horizon for Apple,” said analyst Josh Olson of Edward Jones, who has a “hold” rating on the shares today, largely on lack of near-term catalysts and flattish iPhone growth.

Olson said the price might be on the expensive side.

“There are a lot of opportunities, but there are also risks,” the Edward Jones analyst said. “It is priced at a pretty high premium. They need to sell new phones every few years to you. There is also the elongation of the cycle of the rate at which people buy new phones. Historically, it’s 18 to 24 months. If that elongates to 36 months, that’s another risk. And as phones become better quality and the price is higher, we believe people will switch every 36 months instead of 18 to 24 months.”

At the end of the day, $1 trillion is just a number.

“It is largely symbolic — another threshold, like when Microsoft passed the $500 billion mark around 1999,” said David Yoffie, a professor at the Harvard Business School. “There is no meaningful difference between being a $980 billion, $990 billion and $1 trillion company.”

“That was seen as a mark of the size, growth and strength of a new generation of companies,” he said. “Apple is in a similar situation, where it’s getting to a new threshold. It’s going to be perceived as the first of many.

“This will give people in the financial markets a little more confidence that it’s not a threshold that can’t be broken,” Yoffie said. “When firms get to this size, the longevity of their operations tend to be quite long. It takes a long time for a company the size of Apple to melt away or get acquired. If it lasts 100 years, it’s only less than halfway through its first century.”