• Apple is expected to soon become the first US-listed company with a $2 trillion market capitalisation, a milestone that would come two years after the company first passed the $1 trillion mark.
  • Such an achievement speaks to Apple's ability to build a solid ecosystem around its products, transforming its business into one that was once reliant on hardware sales to one increasingly driven by add-ons like services and accessories.
  • Aside from Apple's burgeoning wearables and services businesses, Apple is expected to be on the cusp of its biggest iPhone upgrade cycle in years with the introduction of its first 5G iPhone.
  • The only other company to ever reach the market value milestone was Saudi Aramco, which briefly held a $2 trillion valuation in December.
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Apple is poised to soon become the first United States-listed company to hit a $2 trillion market capitalisation, a milestone that would put it in a select group and set it on track to become the most valuable public company ever. The iPhone maker passed the $1 trillion mark for the first time roughly two years ago. (At end of trading on Tuesday, Apple's market value was $1.98 trillion.) 

To do so, Apple stock would have to trade at $467.77, as CNBC points out, after closing at $462.25 on Tuesday.

The achievement is evidence that Apple's strategy of morphing itself into more than just the iPhone company by branching out into digital entertainment and financial services is paying off — even during a global pandemic. 

That Apple's wearables and services segments have so quickly become such important parts of the company's business also underscores Apple's biggest advantage and part of what makes it so valuable: the loyalty of its customers. 

An AlphaWise study from 2017, for example, found that 92% of iPhone users surveyed who were "somewhat or extremely likely" to upgrade in the next 12 months planned to stick with the iPhone. 

"When a new user starts to use Apple's smartphones, it tends to stay on Apple's smartphones," Jeriel Ong, an equity research analyst at Deutsche Bank, said in an interview with Business Insider. "Apple tends to be stickier and that tends to be valued more."

That loyalty, and many of the company's business decisions over the past decade, may be how Apple found its way to such an exclusive club. Saudi Aramco, the gargantuan oil conglomerate, is the only other publicly traded company to ever reach a $2 trillion valuation, briefly grazing the milestone in December 2019.

Apple has proved it's not a one-trick pony

The stickiness of Apple's customer base has become more important than ever in recent years as the company has increasingly leaned on services and wearables to make up for slowing iPhone sales.  Apple's services segment, which includes newer offerings like Apple TV Plus and the Apple Card, as well as revenue from the App Store and Apple Care, is now its second-largest product segment behind the iPhone as of its fiscal third-quarter of 2020. Apple's services grew by 15% year-over-year and set a record for the June quarter.

Since the launch of the Apple Watch in 2015 and AirPods in 2016, Apple has also grown to lead the global market for wearable devices. The International Data Corporation reported that the company shipped more wearable devices than rivals like Xiaomi, Samsung, Huawei, and Fitbit in the first quarter of 2020. 

Apple said in April 2019 that its wearables division alone was the size of a Fortune 200 company, and in its fiscal third-quarter its wearables, home, and accessories segment generated $6.4 billion in revenue, up from $5.5 billion one year ago.

That's especially critical considering Apple's wearables business barely existed five years ago, Ong said.

Such growth has given Wall Street confidence that there's plenty of room for Apple to grow even if iPhone sales are stagnant, easing concerns that Apple has become too reliant on its smartphone business. 

Aside from the direct impact Apple's wearables and services segments have had on the company's business, they also strengthen Apple's ecosystem — making it much more difficult for an iPhone user to switch to Android.

Apple's better-than-expected performance in its fiscal third quarter of 2020 also showed Wall Street that Apple's products are valuable enough to its customer base that people are even willing to spend money on them during a pandemic, buoyed in part by Apple's newest low-cost $400 iPhone SE

"It really solidified, I think, through this period, how high of a priority Apple's products can tend to be in a consumer spending wallet," Ong said. "And that resilience came through in their numbers in the latest quarter."

A 5G 'supercycle' is coming

Apple spent the last few years proving it could grow in new ways that didn't involve breaking iPhone sales records. But even so, 2020 is shaping up to be a breakout year for the iPhone. 

Apple is widely expected to release its first 5G iPhone models later this year, a launch that many analysts had expected would bring Apple's iPhone business back to growth after several quarterly declines.

Daniel Ives, an analyst for Wedbush Securities, has called the launch a "once in a decade" opportunity for Apple. That's because the addition of 5G as well as other improvements could give current iPhone owners more of an incentive to upgrade compared to previous years. He also predicts that 350 million iPhones are in the window of an upgrade opportunity this year.

"Those forces combined really make this a supercycle," Ives told Business Insider. 

That resurgence in iPhone upgrades combined with Apple's booming wearables and services businesses are setting the stage for what appears to be a banner year for Apple — all factors that hinge on Apple's ability to keep its users locked into its ecosystem. 

After all, an iPhone owner with AirPods and an Apple Watch would have to invest a significant amount of money to get a similar experience in the Android ecosystem. 

"The more of these products that people are tacking on, it kind of communicates this idea that the iPhone ecosystem is a little more safe," Ong said. "And that kind of resonates with investors as well."


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