Apple Inc.'s stock recently hit a number of impressive milestones. The share price rose above $600 per share to reach record highs. Additionally, its market capitalization, or share price multiplied by shares outstanding, reached $500 billion. Not since the dotcom craze has a technology firm reached a market cap of a half trillion dollars.

SEE: Market Capitalization Defined

A Stellar History
A company's stock price follows the fundamentals of its underlying business over the long haul, which, judging by the meteoric share price rise, means that Apple's operating growth has been nothing short of remarkable. Over the past decade, both sales and earnings have grown at an average annual clip of more than 35%. Sales are up from below $6 billion in 2002 to nearly $128 billion over the past 12 months. Profits have risen from $65 million to $33 billion over these time frames.

By all indications, Apple's growth is only accelerating. Sales are up more than 41% annually and profits 65% over the past five years. For the coming year, analysts project 45% sales growth and 54% earnings growth. Roughly a decade ago, it introduced consumers to the iPod and revolutionized the music industry with this popular device and iTunes music store. It followed this up with the iPhone and iPad to revolutionize the mobile phone and tablet computer spaces.

One individual recently attributed Apple's success to the introduction of products she didn't realize she needed. Millions of consumers can also attest to Steve Jobs' vision, which started more than three decades ago with the introduction of Mac computers. During his hiatus from Apple, he brought Pixar to moviegoers, revolutionizing the market for animated films. He then returned to create the iPod.

An Uncertain Future
The downside of Apple's stunning string of successes is that it makes future returns much more difficult. The tragic loss of Jobs certainly calls into question its ability to come up with another steady stream of game-changing consumer gadgets. But perhaps more importantly, Apple operates in the fast-changing, ultra-competitive technology industry, and there is plenty of precedent that suggests it will fail to remain a leader in all of the markets it now dominates.

In the music industry, digital streaming and a subscription model are fast supplanting the downloading of music to the iPod device and the need to pay for each song or album. Pandora is popularizing the streaming of music for a flat and affordable annual fee, with a free version available for those willing to put up with a commercial during every few minutes of music listening. Spotify is allowing users to create a library of customized music for a monthly fee, as well as free on a computer in exchange for listening to some commercials.

In the mobile phone space, Samsung is fast on Apple's heals. More importantly, Motorola and Nokia grew to dominate the industry with popular phones, just as Apple does now, but saw their dominance vanish to competitors. Motorola's phone division was recently snapped up by Google, which itself now rivals Apple's software with its Android software. Nokia used to control close to half of the global market, but is now fighting for relevancy in the face of Apple and Samsung.

In the tablet space, a number of more affordable rivals, including devices from Samsung, Barnes & Noble, Sony and Amazon, have already surfaced. The personal computer space is also trying to regain dominance in the laptop space. With this and its other devices, Apple could have a difficult time maintaining its dominance.

The Bottom Line
Apple's rapid growth over the past decade has been incredible, but growth like that is very unlikely to be repeated in the coming decade. It is quite possible that Apple continues to grow in the double digits, and there is speculation it could end up revolutionizing the market for television in the near future. If its current growth trends continue, there is a solid chance its market capitalization will eventually reach $1 trillion. However, many companies have faced equally bold predictions to come up far short of such lofty expectations.

SEE: Steve Jobs And The Apple Story

Related Articles
  1. Budgeting

    Blue Apron Review: Is It Worth It?

    Read about one of the top meal-kit delivery services in the United States, and learn more about what it offers and how much it costs.
  2. Stock Analysis

    JCPenney's Path To Profitability (JCP)

    Learn about what J.C. Penney's management team has been doing to profitably grow its business as the company recovers from years of revenue declines.
  3. Stock Analysis

    3 Chip Makers Betting on the Drone Industry in 2016 (INTC, QCOM)

    Find out which of the big chip makers are betting heavily on a burgeoning consumer drone market that could be the next big wave in consumer electronics.
  4. Home & Auto

    The Latest Airbag Recalls: What to Do

    The latest warnings are from Honda/Acura and Dodge. How to look up your car – and what to do if you find it on the recall list.
  5. Economics

    What is a Complement?

    A good or service that’s used in conjunction with another good or service is a complement.
  6. Investing News

    Super Savings for Your Super Bowl Party? Bet on It

    Prices for wings, avocados and TVs are all coming down, which will make your Super Bowl 50 festivities less costly.
  7. Retirement

    Ipsy Review: Is It Worth It?

    Discover the history of ipsy, how much packages cost, options available for membership, major competition and what the future looks like for the company.
  8. Stock Analysis

    The Biggest Risks of Investing in Johnson & Johnson Stock (JNJ)

    Learn the largest risks to investing in Johnson & Johnson through fundamental analysis and other potential risks. Also discover how JNJ compares to its peers.
  9. Budgeting

    Craft Coffee Review: Is It Worth It?

    Learn more about one of the first and most flexible specialty-grade coffee subscription services on the market, a perfect fit for any coffee lover.
  10. Budgeting

    Plated Review, Is It Worth It?

    Take a closer look at the ready-to-cook meal service, Plated, and learn how the company can help you take the hassle out of home cooking.
RELATED FAQS
  1. How does a cost-of-living adjustment (COLA) affect my salary?

    Some companies build salary adjustments into their compensation structures to offset the effects of inflation on their employees. ... Read Full Answer >>
  2. Where can you buy NetSpend reload packs?

    You can only purchase NetSpend reload packs at Giant Eagle, Albertsons, Roundy's and Pathmark supermarkets. NetSpend cards ... Read Full Answer >>
  3. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  4. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  5. What role does the OEM (original equipment manufacturer) play in the finished product?

    Original equipment manufacturers (OEMs) do not typically play much of direct role in determining the finished product. However, ... Read Full Answer >>
  6. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center