Microsoft Challenges Apple for Title of World’s Most Valuable Company

Microsoft Stock

Concerns about iPhone sales have caused a recent dip in Apple’s (NASDAQ:AAPL) stock, putting the Silicon Valley giant at risk of losing its position as the world’s most valuable company to Microsoft (NASDAQ:MSFT). Apple’s shares have declined by 4% in the early weeks of 2024 after a 48% surge in the previous year, while Microsoft has seen a 2% increase year-to-date following a remarkable 57% surge in 2023.

On Wednesday, Apple experienced a 0.4% dip, allowing Microsoft to gain 1.6%, narrowing the gap in market capitalization. Apple’s current market value stands at $2.866 trillion, compared to Microsoft’s $2.837 trillion.

Apple’s market capitalization reached a peak of $3.081 trillion on December 14, while Microsoft hit $2.844 trillion on November 28.

The decline in iPhone sales in China, dropping by 30% in the first week of 2024 according to Jefferies analysts, has intensified concerns about Apple’s competitiveness, particularly against domestic rivals like Huawei.

Despite the upcoming launch of Apple’s Vision Pro mixed-reality headset on February 2, which marks the company’s most significant product release since the iPhone in 2007, UBS estimates that Vision Pro sales will have a “relatively immaterial” impact on Apple’s earnings per share in 2024.

Microsoft has briefly surpassed Apple as the most valuable company several times since 2018, most recently in 2021 during concerns about supply chain shortages related to the COVID-19 pandemic.

Both companies’ stocks appear relatively expensive in terms of their forward price-to-earnings ratios. Apple is trading at a forward PE of 28, well above its 10-year average of 19, while Microsoft is trading around 31 times forward earnings, exceeding its 10-year average of 24, according to LSEG data.

Apple’s most recent sales forecast for the holiday quarter missed Wall Street expectations, citing weak demand for iPads and wearables. Analysts project a 0.7% increase in revenue to $117.9 billion for the December quarter.

In contrast, Microsoft is expected to report a 16% revenue increase to $61.1 billion in the coming weeks, buoyed by continuous growth in its cloud business. Microsoft’s quarterly report is anticipated to shed light on its ongoing performance.

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