Microsoft On Pace To Surpass Apple As World's First Company With Trillion Dollar Market Valuation
If for no other reason than inflation, at some point there will be a company that is worth a trillion dollars. Apple is nearly two-thirds of the way there and considered by some the favorite to reach that mark. But will it? Talk of the Cupertino outfit hitting a $1 trillion market capitalization kicked up in earnest four years ago, but things have changed since then and now at least one analyst is predicting that Microsoft will get to $1 trillion first.
Analyst Michael Markowski believes that the first company to reach a $1 trillion market cap will be an online or digital firm, and given the current landscape, few would disagree. Generally speaking, digital firms are scalable, they address a huge market, and they boast high profit margins. On top of that, there are several tech companies that are worth hundreds of billions of dollars. Here is a look at the top five:
- Apple: $618.3 billion
- Alphabet (Google): $548 billion
- Microsoft: $494.6 billion
- Amazon: $366 billion
- Facebook: $343.1 billion
Markowski points to the LinkedIn deal as a key driver in Microsoft's growth, one that will increase its price to earnings ratio (PE multiple), which is the ratio of a company's current share price relative to its per-share earnings.
"Since Microsoft has the highest free cash flow yield of the 10 companies in my digital universe, it's the most undervalued. Microsoft clearly has the potential to outperform the market. Most importantly, the downside for its share price is limited since the current dividend yield is 2.5 percent," Markowski surmises for Equities.com.
Microsoft might also benefit from a pair of rulings from the U.S. Securities and Exchange Commission that opens up online crowdfunding by allowing companies to advertise to the public and investors who are not accredited to participate in fundraising rounds. Markowski predicts that millennials will routinely want to invest relatively small amounts of money—$100 or less—into high-risk scenarios that could see massive returns of 10X or even 100X their investment.
Whether or not his predictions hold true remain to be seen. In the meantime, Microsoft finds itself on solid footing with innovative releases such as the Surface Book and Surface Studio, along with investments into machine learning, while Apple is coming off its first annual sales decline in 15 years.