Apple Hits $1 Trillion To Become First Trillion Dollar Company; But It’s Still Not The Most Valuable Company In The World

Today, Apple (AAPL) became the first $1 trillion public U.S. company. Its stock jumped 2.8 percent to $207.05 (as of 9:15 a.m. Pacific), taking its gain to 9 percent since this Tuesday, when it released its latest quarterly earnings. Apple management reported higher than expected quarterly results, and mentioned that it bought back $20 billion of its own shares.

But in spite of all of the press coverage around this major milestone, Apple is not even the most valuable company in the world. That distinction belongs to fellow tech giant Amazon. How can that be, when Amazon’s market capitalization is only a ‘meager’ 887 billion? The key lies in the metric used to measure a company’s value.

Most analysts use “Enterprise Value” rather than market capitalization to measure a company’s value because it accounts for the total operating value of the firm and adjusts for the capital structure of the firm (with equity, debt, and cash). A large part of Apple’s equity value is in the hoard of cash on its balance sheet, which doesn’t reflect the ongoing value of the company. They could use that cash to issue a dividend or buyback shares, but it wouldn’t change how much the actual company is worth based on its potential future profits. In fact, Apple typically buys back shares every quarter.

Amazon passed Apple in enterprise value back in June during its meteoric rise and is now worth $80B more than Apple. Amazon and Apple are just two of the tech giants (dare we say “conglomerates”) that now make up the most valuable companies in the world. We took a closer look at the rest of the tech giants and plotted their enterprise values over time using Sentieo’s Plotter tool.

 

Tech Giants Enterprise Value

Sentieo

Interactive Chart: http://snt.io/c8B2JRXn2

Looking at the chart, we can see that Apple (black line) and Google (red line) had been leading the pack since 2016. However, around February of this year, Amazon surpassed them both to become the most valuable, and after some back and forth, broke away at the beginning of June.

Facebook (blue line) and Netflix (purple line), while also members of the “FANG” group, actually have much lower enterprise value that Amazon and Apple.

 

Regardless of Enterprise Value or Market Cap, Tech Is Taking Over

The more important thing to note is that these tech giants are taking the stage as the world’s most valuable companies, both in enterprise value and market cap. In July, CNBC reported that the majority of the returns this year on the S&P 500 index have from tech giants. The tech companies in the table below are responsible for 99 percent of the S&P 500 returns this year, meaning the rest of the S&P remained almost flat. (Data as of July 10, 2018)

This hasn’t been the case since the last dot-com boom in the 1990s, when Cisco was anticipated to become the first trillion dollar company. We plotted a few tech and oil companies to look at how market leadership has changed over the past 10 years.

The large grey spike in 2008 represents PetroChina’s peak market cap.

In 2006, Microsoft (blue line) had the fourth largest market cap but was still eclipsed by Exxon (orange), GE (black), and PetroChina (gray) — and closely followed by Total (teal).

In 2011, Apple (red) came in third place to Exxon and PetroChina.

But in 2016, Apple (red), and Microsoft (blue), Amazon (purple) and Facebook (green) all took the top 4 highest market cap spots, dissimilar to the situation today.

 

Market Cap: Tech vs. Oil 

Interactive Chart: http://snt.io/aHB2JPRNV

Based on their monstrous market share, we anticipate that the tech giants will rule for a while — unless another unexpected dot-com crash occurs.

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Amazon Competes With Everyone — And Wins

This article was originally posted on Forbes.

No other company has done a better job of attracting constant media attention than Amazon ($AMZN). With shares hovering around $1,000 per share, the retail-tech giant now stands as one of the four largest companies in the S&P 500 with a nearly $500 billion market cap. That represents a more than 50,000% return from the $1.73 IPO price two decades earlier. Investors fortunate enough to snatch up shares when it first hit the public market can comfortably call themselves millionaires.

While shares no longer look cheap by any traditional metric, money managers believe ongoing investments will result in even greater future returns. This is because Amazon has shown a remarkable ability to succeed in new spaces that it expands into. This is in many ways, the opposite of conventional wisdom. Large corporations often struggle when they stray outside of their core competencies. Amazon has been able to flip this script.

Amazon’s ability to accomplish this comes in large part from the leadership of its CEO, Jeff Bezos, who has consistently pushed the philosophy of, “Day One.” This excerpt from Amazon’s last letter to shareholders illustrates his commitment:

“Jeff, what does Day 2 look like?”That’s a question I just got at our most recent all-hands meeting. I’ve been reminding people that it’s Day 1 for a couple of decades. I work in an Amazon building named Day 1, and when I moved buildings, I took the name with me. I spend time thinking about this topic.

Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1. To be sure, this kind of decline would happen in extreme slow motion. An established company might harvest Day 2 for decades, but the final result would still come.I’m interested in the question, how do you fend off Day 2? What are the techniques and tactics? How do you keep the vitality of Day 1, even inside a large organization?

Such a question can’t have a simple answer. There will be many elements, multiple paths, and many traps. I don’t know the whole answer, but I may know bits of it. Here’s a starter pack of essentials for Day 1 defense: customer obsession, a skeptical view of proxies, the eager adoption of external trends, and high-velocity decision making.”

Of course, the true measure of success for any public company and its philosophy is how its share price performs. As Amazon’s reach has broadened into new industries, the number of companies who need to mention Amazon as a competitor has broadened as well.

We used Sentieo’s advanced document search to construct a query that uncovers every mention of Amazon as a competitor in public company filings (10Ks, 10Qs, 8Ks, earnings calls, investor presentations, etc.) in the last 10 years. In the chart below, you can see that mentions of Amazon have grown considerably over the past 10 years while the stock price has also grown in lockstep.  

Mentions of “amazon competitors” in public filings and AMZN stock price (Source: Sentieo Document Search)

Drilling down into specific sectors, the same pattern shows itself. Take Air Freight and Logistics, a nascent segment of Amazon’s business, for example. It was only in 2016 that Amazon first made an announcement to lease 20-40 Boeing jets to augment their distribution capabilities. If we look at the mentions of Amazon in only Air Freight and Logistics company filings, we again see the number of mentions skyrocket. Read More

Mosaic Quick Take: the 35% Downside in $GRUB in one chart

With Amazon Restaurants expanding in NYC (with free delivery) and Facebook getting into food ordering, it is a wonder that the likes of Fortune continue to write pieces applauding headline growth. It is easier to report on the past than to weigh the future but that is all that actual investors do. Investment into delivery infrastructure is far outside GrubHub’s core competency and the long-term margin impact is weighing on the stock today. We present their real operator metrics as viewed on Mosaic without further commentary.
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Improved User Experience Driving Organic Growth at $EBAY, with Plenty of Upside

$EBAY has long been one of the most optically undervalued names in the internet space, due in part to disappointing fx-neutral GMV growth over the last few years. Now its position in the e-commerce space is under attack — Amazon is ahead of the pack and likely to stay that way, and the rest of the space is crowded with challengers. Walmart and others are making significant investments in their marketplace businesses and see EBAY as market share opportunity in the space.

Saving Ebay

Ebay’s main defense against this is a move to a product-based catalog from a listings-based catalog, otherwise known as their structured data initiative. This is meant to improve performance in organic search and product discovery. The latter still needs a lot of work in both of the key elements of discovery: Inventory and Personalization.

Problems with Inventory

I tried looking for a Fitbit and the first result is the very original Charge from two years ago. None of the top 5 models are a new product. Just compare that to Amazon’s search results on the right:

eBay vs Amazon Products
eBay vs Amazon Inventory Listings

Problems with Personalization

Ebay still has work left to do on personalization as well — just look at the main page screenshots below. When entering my login credentials (right) and without login (left). Most items are either the same product or in a similar category to the rest. There is no personalization here, which is quite sad considering I have made dozens of purchases over the last couple of years.

eBay Personalization
eBay Personalization

But Are Things Turning?

Ebay does seem to be making improvements, however. In its Q2 results, EBAY posted an fxn (fx neutral) GMV beat and guided up full year revenues with management pointing to early benefits from the structured data rollout. This coupled with improved profitability pushed the stock up massively.

For Q3, the structured data rollout will continue to be a focus. Our Mosaic data shows some competing trends here. Analysts expect fxn GMV to decelerate (blue line w/ markers), but website traffic (orange) continues to remain at very elevated levels, although the relationship has admittedly broken down a bit. Channeladvisor SSS data (purple) and Google Trends (green) are also ticking up on the quarter but are not indicating a material dislocation vs. expectations.

 

screen-shot-2016-10-14-at-10-37-56-am
Ebay’s data on Mosaic

 

We also see engagement significantly improving in the charts below, supporting the thesis of an improved user experience. Monthly average pages displayed (left) and monthly average stay per visitor (right) both seem to be accelerating.

Solid Improvement Through Summer
Solid Improvement Through Summer
People really are spending more time on the site!
People really are spending more time on the site!

EBAY seems to be making some improvements to the user experience and has seen early positive results. While EBAY stands to benefit from the e-commerce wave, it must still navigate a changing landscape riddled with immense competition.

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Technical Thoughts: Sentieo’s Alexa Skill and the Three Fundamental Laws of Voice User Experience $AMZN $GOOGL $AAPL

Sentieo’s Alexa Skill is live! We present some thoughts from our technical team recapping our experiences for the benefit of those who are keen on considering the future of computer interfaces.

For Voice User Interfaces (VUIs) to have any chance of success, the future direction of Voice User Experience (VUX) will be strongly tied to physical, not software, constraints.

The three features of these will be:

1) At least 100 words per minute (wpm) input

2) close to 200wpm output

3) under 250ms response time.

We are nowhere close.

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$GOOGL Trips Goes Native: When will $AMZN buy $TRIP?

We have spent the past day playing around with the new Google Trips native app. Reviews have been effusive, with titles like “killer travel app” (The Verge) and “a free, full-time travel guide” (TechRadar). The user interface is a breath of fresh air and matches the clean aesthetic we’ve come to know and love from Google, but it doesn’t make us run out and short TripAdvisor right away. Unlike the Chinese OTA sector, where the two industry leaders $QUNR and $CTRP literally threw billions at each other before finally making peace, the Western “TripAdvice” industry is bifurcating and this is the reason why $GOOGL and $TRIP will coexist peacefully in the medium term. In the long term, $TRIP will probably not exist as an independent entity. We explore why it could be worth more to $AMZN instead.

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Retail Bloodbath: Parsing the Cyclical, Electoral, and Structural Triple Threat

The retail sector is going through a rough patch due to digital disruption, weak consumer sentiment (driven by election fears), and commodity deflation, leading to a series of bankruptcies and store closures. According to Sentieo’s document search, retailers are facing the toughest of times – evidenced by drastically increased rates of store closures, and putting into question the very survival of these firms.

Bankruptcy and store closures trending higher vs. 2008 recession period

The American retail landscape has seen a host of bankruptcies (Aeropostale, Sports Authority, Sports Chalet) and store closures in the last couple years. Macy’s recently announced the closure of 100 stores in FY17, followed by 40 closures in FY16.

We did a document search in Sentieo of all retailers for the term “Store closure.” As seen in the graph below, the mention of “store closure” by retailers is trending higher vs. the 2008-09 recession and the 2012 election, highlighting the ongoing bloodbath in the retail space.

store-closures-j

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Bears Be Warned, Pandora $P Quite Literally Bought The Quarter

We are huge fans of Tim Westergren, who wrote the textbook on scrappy startups having founded and led Pandora through the tech implosion of the early 2000s. Doing everything to keep Pandora alive, from convincing employees to defer salaries, to maxing out personal credit cards, Tim’s vision of a Music Genome Project (US Patent 7,003,515) ultimately proved immensely valuable. But that was a decade ago.

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Since then, huge competitors from adjacencies like Apple ($AAPL) and Youtube ($GOOGL), well funded entrants like Amazon ($AMZN), to startups like Spotify and Tidal, have waded into the space with new technology. Spotify today was the subject of fresh discussions around an $8bn IPO while Pandora languishes at a $3bn market cap. A combination of 1) a subscription-based business model, 2) on-demand listening and 3) curated discovery has proven extremely successful and has presented a serious threat to Pandora’s lean-back, low ad load, passive listening model.

Tim has returned to rescue Pandora once again. Pandora’s pivot is 6 years too late, but late is better than never, and they are now pulling out all the stops. In this post, we show:

  • How the Street has gotten Pandora’s modeling so very wrong – and is still doing it!
  • How Pandora is ex growth in users and in technology
  • How to track Pandora on operator metrics using our Mosaic product and ask the right questions
  • How to import custom data sets into our Plotter and answer those questions

Put your favorite playlist on, and let’s begin!

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Latest Trends in Cord Cutting

Consumers are dropping their cable TV subscriptions at higher rates as they spend more time online and switch to smaller packages like Netflix, Amazon and Hulu.  In this quick post, we will show you how to use Sentieo to analyze this trend and see who is most exposed.

Doing a basic search on “cord cutting” in our Document Search the first key takeaway is how much more companies are mentioning “cord cutting” in their filings and transcripts.  You can see below with the red bar chart, how the number of mentions has grown over the last year.

Cord Cutting Read More