Just How Big Is Apple’s Growth Challenge

By: Richard_Shaw

Apple (AAPL) faces a monumental continuing growth challenge. It is so large that in order to continue growing at its recent pace, it has to create revenue and market-cap each year equal to the entire revenue or market-cap of major companies.

This chart from YCharts.com shows that Apple increased its market-cap by nearly 38% in the last 12 months, and its revenue by about 22%.

In light of that growth data, let’s see, denominated in companies, what would be entailed for Apple to increase its market-cap and revenue by 20% to 25% in the next 12 months.

At about $515 billion in market-cap and about $157 billion in revenue, they would need to increase market-cap by $103 billion to about $129 billion; and increase revenue by $31 billion to about $39 billion.

That means they would have to add market-cap about the size of one of these companies in just 1 year (and do better than that in each subsequent year):

•Amazon ($103 B)
•Bank of America ($102 B)
•Intel ($104 B)
•Unilever ($102 B)

Alternatively, that means they would have to add revenue about the size of one of these companies in just 1 year (and do better than that in each subsequent year):

•Aetna ($35 B)
•Allstate ($33 B)
•American Express ($29 B)
•DuPont ($39 B)
•General Dynamics ($33 B)
•Goldman Sachs ($31 B)
•Honeywell ($38 B)
•Oracle ($37 B)
•Plains All American ($37 B)

They may well do it, but when the size of the growth hurdle is denominated in the named other large company equivalents, it is simply amazing.

They need to grow incrementally by amounts annually that are equal to or greater than the total lifetime accomplishments of major corporations.

It puts a different lens on the growth challenge, and gives rise to reasonable questions about the limits to growth — how much they can continue to add year upon year.

By Richard Shaw 
http://www.qvmgroup.com

Richard Shaw leads the QVM team as President of QVM Group. Richard has extensive investment industry experience including serving on the board of directors of two large investment management companies, including Aberdeen Asset Management (listed London Stock Exchange) and as a charter investor and director of Lending Tree ( download short professional profile ). He provides portfolio design and management services to individual and corporate clients. He also edits the QVM investment blog. His writings are generally republished by SeekingAlpha and Reuters and are linked to sites such as Kiplinger and Yahoo Finance and other sites. He is a 1970 graduate of Dartmouth College.

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