If the smartphone tech giant Apple (NASDAQ: AAPL) were a country, it would be the 11th richest in the world — at least by the measure of its cash reserves.
At the end of last week, the company’s market cap hovered around $830 billion, continuing a 10-year run that has been on an overall gradual upswing.
Its stock market value is heading toward a new milestone, and its 10th anniversary iPhone launch could push them closer to becoming the first-ever $1 trillion company.
This year alone, shares of Apple are up almost 35%.
With a potentially huge quarter on the way, a cash pile of hundred of billions of dollars, an ever expanding product line, and a ton of good will heading into the back half of the year, we may just see Apple hit the $1 trillion milestone sooner rather than later.
It’s crazy to think that five years ago, Apple had “just” $110.2 billion in cash.
But now, because its stockpiles have grown tremendously since then, it’s increasingly stashed away most of its cash overseas for tax purposes.
There’s growing hope that Apple may soon be able to bring back, or repatriate, this cash to the U.S. at a onetime lower tax rate if President Donald Trump is able to get his tax plan through Congress.
So, what will the tech company do with all its money once it reaches $1 trillion?
Apple could use it to hire more workers, build more plants, make acquisitions, repurchase stock, and boost its dividends.
Some argue that if Apple and other large tech companies were allowed to bring back its cash piles to the U.S., it could stimulate the entire American economy.
And some industry experts say that the tight-lipped tech giant will just sit on its gargantuan pile of Benjamins like a corporate incarnation of Scrooge McDuck. But still many others have rolled out other possibilities for its record-breaking $1 trillion benchmark…
Buy Tesla and Netflix
The old adage “if you can’t beat them, join them” has had a multibillion-dollar resurgence thanks to Silicon Valley.
Facebook’s (NASDAQ: FB) $1 billion acquisition of Instagram, followed by its $19 billion acquisition of WhatsApp, is proof enough that buying out the competition can be much easier than fighting it.
Apple could easily do the same thing many times over with its copious stores of cash salted away offshore if repatriation becomes more favorable.
To date, Apple’s largest deal was its $3 billion purchase of Beats Electronics back in 2014. But these other companies sport market caps that are much, much larger.
Apple’s widely rumored plans to develop its own autonomous electric car has already helped it to steal several engineers from leading electric car maker Tesla (NASDAQ: TSLA).
With Tesla’s market cap just hovering above $53 billion, Apple could easily afford to swallow up this rival with enough money left over to buy a number of other high-profile tech companies to really kick-start its own autonomous EV project.
Another potential target would be streaming giant Netflix (NASDAQ: NFLX), which has an estimated value of $66 billion.
As the year goes on, and as Netflix squeezes the bears something good (topping 100 million subscribers and sustaining subscriber growth), the merits of a marriage between the streaming service and Apple have become more apparent.
The tech giant has recently begun dipping its toes into the original video content sector with the poaching of two Sony (NYSE: SNE) executives to help with the launch of Apple Music’s documentary series Up Next.
But Apple is still in the thinking stage. And instead of spinning its wheels, it should just tap into the indisputable mover and shaker that Netflix is.
Netflix is affordable and such a transaction would immediately make Apple a player in the media space.
With its foray into original programming and commitment to high-quality shows, production values are undoubtedly high and Netflix is going to need cash to continue producing such content.
The two could piggyback on each other’s success. Netflix obviously needs a steady stream of cash in order to continue producing edgy and popular content, and Apple could finally enter the original programming sector as a major player right off the bat.
Sure, making the smart decision to buy out competition would be the most sensible thing to do with a mere quarter of Apple’s cash mountain, but there are also some other crazy ideas that are fun to consider…
Making the World a Better Place
An Apple ad from 1996 for the Macintosh PowerBook concluded with the line: “The power to save the world.”
The company was referring to the device’s computing abilities, but over two decades later, the tech giant is actually in a position to make a significant contribution to saving the planet — or at least the lives of millions of people who live on it.
According to United Nations estimates from 2015, it would take $267 billion per year until 2030 to “eliminate hunger immediately.”
José Graziano da Silva, the director general of the UN Food and Agriculture Organization, said at the time: “Given that this is more or less equivalent to 0.3 percent of the global GDP, I personally think it is a relatively small price to pay to end world hunger.”
If Apple so desired to improve global conditions, it could greatly contribute to eliminating extreme global poverty.
Apple would only have to spend $246 billion to completely eliminate global poverty for four years, but then we’d be right back at square one.
The company could easily make a lasting impact, however, by pledging its cash to a charitable trust that pays out 5% to 6% each year.
Apple could theoretically afford to give approximately $15 billion each year, which would certainly go a long way toward reducing global poverty and the problems that go along with it.
Spoil Each of Its 115,000 Employees
Henry Ford, one of the greatest business minds of the 20th Century, apparently reasoned that doubling his workers’ wages would mean that they could then afford the products they were making.
The truth behind the wage rise has, in fact, more to do with worker morale but is still a lesson that Apple could learn from nonetheless.
Apple executives rank among the richest people in the world, with CEO Tim Cook’s net worth estimated at around $785 million.
If Apple really wanted to, it could easily afford to make all its 115,000 employees multimillionaires with one-off bonuses of $2.17 million.
There are a number of options that Apple could consider if it wished to reward its many employees around the globe with a share of its monumental $1 trillion.
Wouldn’t it also be a nice retirement gift if Apple bought each one of them a private island to live on when they retired?
I certainly think so.
Small islands go for as little as $100,000, but that doesn’t include the costs of clearing them for development, building a nice little cottage, and setting up water reservoirs and electrical infrastructure.
Luckily, Apple could spend as much as $2 million for each of its employees to have a livable island in paradise for when they retired.
The Bottom Line
Don’t hold your breath…
All of these scenarios, including the more interesting and eccentric ones, are purely hypothetical. Apple’s management has a duty to act in the best interests of its shareholders.
While it’s fun to imagine that Apple may hand out private islands and end world hunger, the company’s cash is better spent on its research and development labs, steady share repurchases, and growing dividend payouts.
With that being said, these hypothetical scenarios all serve to illustrate one thing: Apple has immense buying power and cash flow.
With the prospect of hitting $1 trillion looming, it’s a historical feat that should be commended, for sure.
That’s all for now.
Until next time,
John Peterson
Pro Trader Today