Sunday, June 27, 2010

Can Apple Overtake ExxonMobil As #1 By Market Cap? (AAPL, XOM, MSFT, BP, XTO, USO)

24/7 Wall Street keeps a list of America’s biggest companies by market capitalization rates in its own proprietary Real-Time 500.  The issue worth consideration here may seem rhetorical, yet it is almost hard to fathom in thought.  Apple Inc. (NASDAQ: AAPL) could overtake ExxonMobil Corporation (NYSE: XOM) as the largest company in America by market capitalization.  It was not that long ago that Apple overtook Microsoft Corporation (NASDAQ: MSFT) for the #2 slot, and the issue at hand may be tied largely in part to BP plc (NYSE: BP) and is going to possibly look far different after ExxonMobil closes the XTO Energy Inc. (NYSE: XTO) deal.  Still, it amazing that this notion has even come within the realm of possibilities.
As of yesterday’s close, ExxonMobil Corporation (NYSE: XOM) had a market cap of $287.05 billion based on the 1.36% drop to $61.10.  Apple Inc. (NASDAQ: AAPL) has a market capitalization rate of $246.57 billion after its 1.05% drop to $270.97.
The infathomable difference here is rather extreme: ExxonMobil’s trailing 12-month sales are $301.5 billion versus $36.54 billion for Apple.  Microsoft’s trailing 12-month sales were $58.44 billion.  As far as the Fiscal 2011 estimates from Thomson Reuters ahead, these three rank as follows: almost $440 billion for ExxonMobil, $70.4 billion for Apple, and $67.22 billion for Microsoft.
There is a conundrum here in the energy sector, and one that may skew this, one that may right it, or one that could topple it.  XTO Energy Inc. (NYSE: XTO) is in the ‘pending acquisition’ file for ExxonMobil.  Its market cap is $25.34 billion, and the deal is supposed to be an all-stock transaction if approved and if completed.  Thereafter, this will add to the market capitalization rate of ExxonMobil by the appropriate amounts in the future at such date.
Back on May 27 when we noted the market cap switch where Apple had passed up Microsoft, ExxonMobil had closed at $61.46 versus a $61.10 close on Wednesday.  BP on the other hand was trading at $45.38.  BP trades at $29.67 per ADR based on Wednesday’s close.  The United States Oil (NYSE: USO) ETF is not the most accurately tracking ETF by a long shot, but it is the easiest comparison for equity-only  traders to compare.  The “USO” traded at $34.31 on May 27, and it trades at $34.24 on Wednesday’s closing bell.
So what gives?  If Exxon trades almost any lower than the current price a year out, then Apple merely has to hit the one-year consensus price target (Thomson Reuters) of about $314.00 to be the number one pole position to come in with a $285+ billion market cap.  Exxon’s $287 billion market cap would be challenged.
Of course there is that pending XTO deal which throws a wrench in the machine.  That new $25 billion makes this conundrum something less likely.  XTO is exiting the S&P 500 Index at the close of trading this coming Friday.  If that occurs after all final-final approvals, then these market capitalization rates are going to look much wider apart than they do today.  If Exxon’s market cap grows in addition due to share appreciation it will be even more skewed back in Big Oil’s favor.
It should be pointed out the Thomson Reuters lists ExxonMobil’s average analyst price target at $79.00 for one-year out, and its 52-week trading range is $58.46 to $78.64.  Exxon has already been right at its analyst target, and Apple is effectively close to its 52-week and all-time highs.  The notion that Apple is within this close of striking distance today is almost hard to fathom when you consider that Apple’s stock was at $134.01 a year ago.

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