Apple $509 / $475B market cap

Apple, Inc. has a market cap of $475 billion.

On January 19 2012 their market cap was $400 billion. The value of the company grew by $75 billion.

Why?

Let's try to analyze.

Apple's revenue for 2011 was $109 billion. Let's say in 2012 it will be 10% higher, so $120 billion. Let's be really optimistic and let's say they will have a phenomenal year with total revenue at $140 billion.

There are 366 days in 2012. So we have to divide $140 billion by 366 days = $383 million daily revenue. Wow. Just realized how much that is. OK. Their profit margin in 2011 was 24%, let's again say they will really learn how to cut costs in 2012, and they will improve their profit margin by 25% (this is almost impossible, but, let's just give the best possible scenarios.) Their profit margin will be 31.25% - let's round that to 32%.

So what do we have here. We have $383 million daily sales and profit margin of 32% so that comes to $122.50 million daily profit for Apple, Inc.

OK - now from January 19 2012 to February 14 2012 have had 26 days.

26 x $122.50 million = $3.2 billion

OK, so the company now has $3.2 billion more cash than on January 19th. Using the best possible scenario for Apple, Inc. the company has made $3.2 billion, but the total value of the company has increased by $75 billion, well the market says so.

What I really think, and it is not a secret right now. Somebody is crazy to buy Apple stock at $420 and keeps buying it until it is $510 - whoever these people are, they are not thinking clearly and I doubt they know what they are doing. If it continue like this Apple needs a week to have a market cap of over $500 billion or half a trillion US dollars. Now that is insane and it has no justification whatsoever for such inflated price.

Today, my son celebrated his 2nd birthday, we had balloons, but none of them was so big. For the next birthday party, I will just buy some stocks.

Learn how to say NO. Happy investing.

Damian