Why You Shouldn't Bet Against Apple at $300 Billion

Getty Images

Apple

Apple topped $300 billion in market value Monday.

Apple continues to be the second most valuable U.S. company behind Exxon Mobil, which has a market cap of $375 billion (a 52-week high). Exxon's stock has been surging since April, and now trades at nearly $75 per share. It is off its all-time high of about $95 per share set in October 2007.

Apple could surpass Exxon's market cap by topping $410 per share, assuming Exxon's stock continues trading near current levels.

This remarkable run in Apple’s stock is really a story of the past three and a half years. Look at a chart: It took almost 23 years of trading for Apple to top $100 billion in market cap in May 2007. The next milestone came less than three years later – $200 billion in March of last year. Now, 10 months later, as Steve Jobs would say – boom. $300 billion.

What’s so magical about the past three and a half years?

The iPhone. It was the run-up to the iPhone that pushed Apple past the $100 billion marker – until that point, the Mac and the iPod were the driving forces behind Apple’s business model. Now the iPhone model is taking over, where Apple designs even more of the technology in its products, which results in high margins – and distributes software and media through its app store.

Is Apple overvalued? Don’t assume that.

The company probably has more than $55 billion in cash and long-term investments, so nearly 20 percent of its value is basically cash. Its forward P/E ratio is under 15 – that’s higher than Microsoft’s 10, but it’s growing faster than Microsoft . Amazon’s forward P/E is over 50, by the way.

The main danger for Apple is that its tightly integrated, high-margin model will hit a speed bump somewhere – but good luck predicting exactly when that might happen.

Questions? Comments? [e-mail] you can follow Jon Fortt on Twitter @jonfortt