Microsoft vs. Apple: Battle for the Title of World’s Most Valuable Company
Concerns about iPhone sales have caused a significant decline in Apple’s shares, posing a serious threat to the Silicon Valley behemoth’s ranking as the most valuable corporation in the world.
In contrast, Microsoft is steadily gaining ground, and the gap between the two tech heavyweights is narrowing.
Apple’s shares have tumbled 4% in the early weeks of 2024, casting a shadow over its stellar 48% rally in the previous year. Meanwhile, Microsoft has seen a 2% increase year to date after an impressive surge of 57% in 2023.
The dip in Apple’s stock on Wednesday, coupled with Microsoft’s 1.6% gain, has further eroded the iPhone maker’s lead, with Apple’s market value now standing at $2.866 trillion compared to Microsoft’s $2.837 trillion.
The concerns stem from a decline in iPhone sales, particularly in China, where sales dropped by 30% in the first week of 2024. Analysts at Jefferies attribute this slump to intensifying competition from domestic rivals like Huawei.
Apple’s upcoming product launch, the Vision Pro mixed-reality headset, set to hit the US market on February 2, is eagerly anticipated. However, a report by UBS suggests that the headset’s sales impact on Apple’s earnings in 2024 may be relatively immaterial.
Microsoft’s Ongoing Challenge to Surpass Apple
Microsoft has previously threatened to surpass Apple in market capitalization. Brief incidences occurred in 2018 and 2021, with the latter connected to concerns about supply chain limitations during the Covid-19 epidemic.
Both Apple and Microsoft are deemed relatively expensive by the market, trading at forward price-to-earnings ratios above their 10-year averages. Apple’s forward PE is 28, notably higher than its 10-year average of 19, while Microsoft’s ratio is around 31, surpassing its 10-year average of 24.
Apple’s recent sales forecast, which fell short of Wall Street expectations, and weak demand for iPads and wearables highlighted in its November quarterly report, have contributed to the current market concerns.
Analysts project a modest 0.7% increase in Apple’s revenue to $117.9 billion for the December quarter, marking its first year-on-year revenue rise in four quarters.
In contrast, Microsoft is expected to report a robust 16% revenue increase to $61.1 billion, buoyed by continuous growth in its cloud business.
The tech world eagerly awaits the companies’ upcoming earnings reports, with Apple scheduled to release its results on February 1.
