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

    Beer of the Month Subscription Review: Is It Worth It?

    Learn how you can get access to some of the best craft beers produced in the world, delivered right to your front door every month.
  2. Budgeting

    Just the Right Book Review: Is It Worth It?

    Take an in-depth look at Just the Right Book, a subscription service that delivers personalized book selections based on your reading history and preferences.
  3. Entrepreneurship

    ‘Happy Birthday to You’ Belongs to Everyone Now

    A class action lawsuit over the copyright to the iconic American song “Happy Birthday to You” ends by placing the ubiquitous ditty in the public domain.
  4. Investing News

    Who Does Cheap Oil Benefit? See This Stock (DG)

    Cheap oil won't benefit most companies, but this retailer might buck that trend.
  5. Budgeting

    The Honest Company Bundles Review: Are They Worth It?

    Learn more about The Honest Company and its bundle subscription services, which deliver discounted diapers, formula and other baby products to your doorstep.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. Economics

    What is a Complement?

    A good or service that’s used in conjunction with another good or service is a complement.
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. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  2. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  3. Black Swan

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

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

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center