Apple Corps recently saw its share price hit $700 and its market cap exceed $650 billion. A number of media reports stated that this made Apple the most valuable company in history. The feat deserves an asterisk in the history books, as it may not qualify as the largest ever, but it certainly speaks to Apple's success in selling innovative technology hardware to consumers. Exxon Mobil also rose to prominence as one of the largest firms on the planet when oil prices reached their highs prior to the 2008 recession; its market cap remains firmly above $400 billion. Below is an overview of past corporate giants and how their share prices fared in following years.
Chinese integrated oil giant PetroChina went public in Shanghai back in November 2007. Several media reports placed its market value, shortly thereafter, at around $1 trillion as the stock continued to rise after the IPO. When including the shares not actively traded, the math does support the world's first trillion dollar market value. The share price, however, has not held up well. The American Depositary Receipts that trade in the United States peaked at a hair above $255 per share in late October 2007, but currently trade at less than half that value, nearly $120 per share.
As with Exxon, energy shares were riding high when the economy was in full swing prior to the Great Recession, but global economic growth has slowed dramatically since. Growth appears to be slowing in China, in particular, which is denting the optimism in PetroChina's ability to capitalize on growing energy needs in the world's most populous country.
Back in December 1999, software giant Microsoft's stock traded at nearly $60 per share. Despite very consistent sales and profit growth since, the stock now trades at about half this all-time high. Recent news coverage of Apple has stated it finally exceeded Microsoft's 1999 market capitalization level of $600 billion. The controversy continued because it still didn't exceed Microsoft's inflation-adjusted market cap, but did again demonstrate just how successful both firms are, and were, at their peak.
In Microsoft's case, its stock simply had gotten ahead of where its fundamentals were nearly 15 years ago. Back in 1999, Microsoft's price to earnings multiple was around 50. Today, it is only around 10. So despite the fact that sales and profits have grown at an average annual double-digit rate for more than a decade now, the stock has been flat for the better part of a decade, because the valuation reached bubble proportions.
Communications equipment titan Cisco's share price peak coincided with the peak of the Nasdaq in March of 2000. Back then, its stock reached $77.31 per share and its market capitalization was near $500 billion. Microsoft was already on its way down and had seen its market cap fall closer to $500 billion by March of that year. Analysts couldn't have been more bullish on Cisco. One report at the time marveled at the "explosive" growth potential of the optical market for fiber and related communications products. It was widely projected to reach a $1 trillion market capitalization within a few years.
As it turned out, Cisco's stock currently trades closer to $20 per share. Along with Microsoft, its growth has been quite decent since the dotcom bubble. The main problem was the price to earnings multiple was around 120 back in 1999; today, it's around 10.
The Bottom Line
Companies that have seen their value reach all-time highs have a dubious track record at keeping the title as the world's most valuable company. Apple is riding high with the current popularity wave of its products. This could easily continue, but just as easily could start to slow.
At the time of writing Ryan C. Fuhrmann was long shares of Microsoft (since 2007) and Cisco (since 2002) but did not own shares in any other company mentioned in this article.