Microsoft Challenges Apple for the Title of World’s Most Valuable Company

Highlights

• Microsoft challenges Apple‘s position as the world’s most valuable company.
• Apple’s stock decline, down 4% in 2024, raises concerns about iPhone sales.
• Microsoft’s stock is up 2% year to date, continuing a 57% surge in 2023.
• Apple’s market value is at $2.866 trillion, slightly ahead of Microsoft’s $2.837 trillion.
• Apple’s iPhone sales in China dropped 30% in the first week of 2024, facing competition from Huawei.
• Microsoft briefly surpassed Apple as the most valuable company in 2021 amid supply chain concerns.
• Both companies have relatively high price-to-earnings (PE) ratios, signalling potential overvaluation.
• Apple’s Vision Pro mixed-reality headset launch is anticipated, but its impact on 2024 earnings might be limited.
• Microsoft expected to report a 16% revenue increase to $61.1 billion, driven by cloud business growth.
• Apple’s recent sales forecast miss for the holiday quarter attributed to weak demand for iPads and wearables.
• Quarterly reports for both companies will provide insights into their future trajectories.

In a surprising turn of events, Microsoft is poised to overtake Apple as the world’s most valuable company, raising questions about the ongoing dominance of the Silicon Valley giant. Apple’s recent dip in stock, driven by concerns about iPhone sales, has allowed Microsoft to narrow the gap and put the two tech giants on a competitive edge.

As of now, Apple’s market value stands at $2.866 trillion, slightly ahead of Microsoft’s $2.837 trillion. This shift comes after a 4% decline in Apple’s shares in 2024, contrasting with Microsoft’s 2% increase year to date, building on its impressive 57% surge in 2023.

Microsoft Challenges Apple for the Title of World’s Most Valuable Company

The primary cause for Apple’s recent stock fluctuations is worries about iPhone sales, particularly in China, where a 30% drop in the first week of 2024 has been reported. Analysts from Jefferies attribute this decline to increasing competitive pressures from domestic rivals such as Huawei.

Microsoft’s resurgence is not unprecedented, as it briefly surpassed Apple as the most valuable company several times since 2018, with the most recent occurrence in 2021 amid concerns about supply chain shortages related to the COVID-19 pandemic.

Both companies are currently trading at relatively high price-to-earnings (PE) ratios, a common valuation metric. Apple’s forward PE is at 28, well above its 10-year average of 19, while Microsoft is trading at around 31 times forward earnings, surpassing its 10-year average of 24.

Apple’s upcoming product launch of the Vision Pro mixed-reality headset on Feb. 2 in the United States is highly anticipated. However, UBS analysts suggest that the impact on Apple’s earnings per share in 2024 might be “relatively immaterial.” This release follows Apple’s recent sales forecast miss for the holiday quarter, attributed to weak demand for iPads and wearables.

On the other hand, Microsoft is expected to report a 16% increase in revenue to $61.1 billion, driven by continued growth in its cloud business. This outlook has contributed to the positive sentiment surrounding Microsoft’s stock.

In the coming weeks, both companies will release their quarterly reports, with Apple’s results scheduled for Feb. 1. Analysts project Apple’s revenue to increase by 0.7% to $117.9 billion, marking its first year-on-year revenue increase in four quarters.

As the tech industry continues to evolve, this battle for the title of the world’s most valuable company between Apple and Microsoft adds a compelling chapter to the ongoing narrative of competition and innovation in the sector. Investors and tech enthusiasts alike will be closely watching the outcomes of these quarterly reports to gauge the trajectory of these industry giants.