An update to Siri… Google Maps and Waze coming to CarPlay… a new photo system in iOS 12… and the debut of “Memoji,” a feature that allows you to create your own emoji that mimics your particular facial expressions.
Those were just a few of the upgrades and new features announced yesterday at the 11th annual Apple Inc. (Nasdaq: AAPL) Worldwide Developer Conference (WWDC).
CEO Tim Cook also noted the App Store, which is now 10 years old, is the largest app market in the world, with 500 million weekly visitors. It’s brought in $100 billion for app developers.
However, as worthy of attention as most of Apple’s announcements are, the conversation here on the ground is all about “The Sweepstakes.”
I’m talking about the race to be the first $1 trillion market-cap public company.
And this race is possible because of what we’ve been talking about since Day 1 here.
The road to wealth is paved by tech.
As far as I know, back in early 2015 I was the first tech analyst to predict that Apple will be the first U.S. company to reach a market cap of $1 trillion. That number now sits at $952.41 billion.
Two years after that, Warren Buffett followed my lead and said Apple would be the first company with a $1 trillion market cap. And this comes from the man whose Berkshire Hathaway Inc. (NYSE: BRK.A, B) was, at the time, even closer to that mark.
But you don’t have to take my word for it. Even Wall Street is waking up to this very powerful and profitable fact.
Back in December, Barron’s predicted Apple will reach $1 trillion in market value in 2018. The rumblings for Apple to reach that value haven’t stopped since.
Now, though, another “horse” has entered “The Sweepstakes.”
Morgan Stanley recently predicted that another stock I have often recommended could hit a $1 trillion market cap in as little as a year.
Today, I’ll tell you about Apple’s big competition here.
I’ll let you know who I think the winner will ultimately be.
Mr. Softy Aims for a Hard Target
Little more than four years ago, Wall Street would have laughed – and laughed some more – at Morgan Stanley’s recent $1 trillion prediction for Microsoft Corp. (Nasdaq: MSFT), which is now valued at $784.92 billion.
That’s when I predicted that, under new CEO Satya Nadella, Mr. Softy was heading into a massive growth mode.
It did just as I forecast – and yesterday, Microsoft continued to do just that.
That’s when Nadella and company announced that they’re acquiring GitHub, the code-repository company that’s treasured by software developers, for $7.5 billion in stock.
Part of the reason behind this purchase is to grow trust and supporters among the 28 million developers that contribute to GitHub’s large code repository.
That need to ensure trust among developers is part of the reason behind Apple’s annual WWDC event. You see, there’s another contest going on here: a competition to see who can attract and keep the most talented developers – the key employees behind both of these tech giants’ futures.
Now, as far as “The Sweepstakes” goes, I still predict that Apple will be the first to reach $1 trillion.
So, let’s take a look at what’s driving these two stocks…
Tech’s Trillion-Dollar Formula
Before we drill down and take a look at these two former rivals, let’s note something really vital going on here.
These days, nearly every firm competing in “The Sweepstakes” comes from tech. In fact, every single U.S. stock on the list of the world’s 10 most valuable firms is a tech company.
Besides Microsoft and Apple, our contest’s other major front runners are Amazon.com Inc. (Nasdaq: AMZN), now valued at $817.9 billion, and Alphabet Inc. (Nasdaq: GOOGL), with a market cap of $800.12 billion.
And when it comes to Microsoft, I’m not at all surprised with Morgan Stanley’s $1 trillion market forecast. Then again, we’ve been way out in front of the Street on this one.
Shortly after Nadella became Microsoft’s CEO in February 2014, I told you that I thought the former high-tech laggard would turn into a big earnings leader.
I thought Nadella’s decision to downplay PC software sales in favor of focusing on fields like high-growth, high-margin cloud computing would pay off big.
Even though Microsoft had hardly any cloud sales at the time, I forecast that it would quickly turn into a major player. And that’s just how events have played out.
In the most recent fiscal quarter, sales of Microsoft’s Azure cloud platform jumped 93%. With Nadella at the helm, this unit has never grown slower than 90% since October 2015, when it began making its cloud numbers public.
Azure and the online commercial version of the Office 365 productivity suite made up a combined $6 billion in sales, a one-year boost of 58%.
No wonder Morgan Stanley is so impressed with this company. The storied investment bank makes this case: Having become a well-oiled machine, Microsoft could rise 34% in value over the coming 12 months.
All it would take is a gain to about $130 a share to lift Microsoft’s market cap to roughly $1 trillion.
Now, while I think Microsoft will get there, Apple has a much bigger head start.
Why Apple Wins
In this case, the math is simple.
As I write this (I did this math a week or so ago), Apple is trading at $187 a share and sports a market cap just shy of $920 billion. At that rate, it would need to rise a scant 8.7%.
That means Microsoft would have to quadruple Apple’s gains over the next year to be crowned the “The Sweepstakes” winner. While that’s possible, it would mean that Team Satya Nadella would soar – and fast – for the next year while Team Tim Cook would do no better than tread water.
As much as I like Microsoft, you’d be crazy to bet against Apple in a case like this. Then again, I was one of the first analysts to predict that Apple would rise to $1 trillion.
I first made that prediction to you in early 2015. And I made that same bold claim as a guest on Varney & Co., the popular Fox Business show.
Not only have I not backed down, but in a chat we had last Jan. 26, I issued a new target price for Apple of $250 a share in the next 30 months. That would put it well ahead of the $1 trillion mark.
Many on Wall Street doubted my new forecast, saying the iDevice King was suffering from a smartphone sales hangover. But my $250 price prediction took into account that the company is moving quickly to improve sales of services like Apple Music and away from its dependence on devices.
And Apple really delivered when it announced second-quarter 2018 earnings on May 1. Yes, smartphone sales volume slipped a bit, but the company more than made up for that with sales of the higher-margin iPhone X.
Overall, sales climbed 16% to $61.14 billion, while profit rose 25% to $13.82 billion, its highest level for a March quarter in the firm’s history. But what really jumped out was the big ramp-up in its services unit.
The number of paid subscriptions for services ranging from HBO to Apple Music rose to 270 million in the period. That was an astounding increase of 100 million subscribers in a single year, a feat that brought in sales of $9.19 billion in the quarter.
Now then, to many investors, “The Sweepstakes” might seem confusing. But not to us…
See, we know that both companies are well-run firms with a lot of upside ahead.
In their own ways, both are pushing high-margin services that will continue to move earnings – and stock prices – much higher.
You can see that no matter which stock gets to $1 trillion first, your portfolio will be the real winner here.
So, I still continue to recommend both stocks as great long-term holdings that make your journey on the road to wealth smooth and profitable.
Now, these two stocks are set to do well in the coming months.
But as I’ve mentioned here many times, the biggest gains come from fast-moving small caps that are breaking out.
And I’ve got one for you here…
You see, a stunning breakthrough is set to spark the most impactful tech revolution you’ll ever witness in your lifetime…
A tiny company’s game-changing device has just been approved by the FCC… and it’s set to spark the most monumental technological transformation you’ll ever see.
This is the only device of its kind to receive this historic approval, and the floodgates are set to open any minute.
With one tiny company at the heart of this revolution, even a small stake could reward you with astronomical gains.
You need to hurry if you want to find out how to take advantage of this ground-floor profit opportunity.