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ERROR: type should be string, got "https://www.barrons.com/articles/apple-why-stop-at-1-trillion-1525801403\nApple: Why Stop at $1 Trillion?\nJack Hough\nUpdated May 8, 2018 2:03 pm ET / Original May 8, 2018 1:43 pm ET\nApple (AAPL), the leader in the race to a $1 trillion market value, is in no particular hurry to win.\nAdam Berry/Getty Images for Apple\nIt is spending feverishly to buy back shares, using its own cash hoard and money freed up by tax cuts. Last quarter alone, it bought $23.5 billion worth of stock, a record. A company that is planning a buyback spree probably doesn’t mind if it is able to buy cheaply for a while. Warren Buffett, whose Berkshire Hathaway (BRK.B) owns 5% of Apple, said as much when discussing buybacks during a recent CNBC interview: “There is no reason at all for me to encourage other people to buy Apple.”\nYet Apple has an excellent chance of reaching $1 trillion by the end of summer—and higher over the following year. The math doesn’t seem especially controversial. It hinges on the assumption that the stock deserves an ordinary valuation—one that is neither especially cheap nor expensive.\nOrdinary, at the moment, is a stock price that is 16.3 times projected earnings for the next four quarters—the valuation of the Standard & Poor’s 500 index. What do ordinary companies look like? A recent screen for ones trading between 16 and 16.5 times forward earnings turned up names like Progressive (PGR), an insurance seller, and O’Reilly Automotive (ORLY), a car parts chain.\nApple shares are already creeping toward ordinary. Shortly before Christmas, when Barron’swrote favorably about Apple in a cover story, the stock was 18% cheaper than the S&P 500 relative to forward earnings. Now it’s 9% cheaper. Assuming no change in the market’s valuation, a move to parity for Apple by the time its fiscal year ends in September could send the stock 16% higher, to about $215, or 16.3 times next fiscal year’s earnings consensus of $13.20 a share. If the share count continues falling at its recent pace, that would leave the company valued at just over $1 trillion.\nIt’s possible Apple could miss estimates, but it has beaten them in 19 of its past 20 quarters, according to FactSet. Earnings estimates could come down by September, but they have lately been rising. Last week, Apple reported 16% revenue growth and 30% earnings per share growth for its quarter ended March. Shares had sold off ahead of earnings on reports of weak supply chain activity for iPhone, but unit sales rose 3% from a year earlier, and revenue jumped 14% on higher pricing. Guidance for the June quarter was better than feared. Supply chain worries appear to have been “noise as Apple pre-bought components, increasing its own inventory,” wrote UBS analyst Steven Milunovich in a note.\nThat leaves Apple well-positioned. Sales of its iPhone X have been strong enough to win over worried investors, but not so strong that the base of potential upgraders to the next model has been depleted. As Milunovich puts it, the Appleverse is still expanding, and iPhone unit growth of low-single-digit percentages looks sustainable even as the upgrade cycle lengthens. Meanwhile, services revenue jumped 31% last quarter, and so-called other revenue, including for AirPods and Apple Watches, 38%. Together, those two categories are 21% of total revenues—bigger than Macs and iPads combined.\nAmong 16 analysts who have already ventured estimates for Apple’s earnings the year after next—that is, in the year through September 2020—the average suggests 11% growth. If that’s a preview of what growth will look like once tax cuts are no longer providing a boost, and when iPhones are even more widely owned than today, it’s a promising one. It suggests Apple can continue delivering low double-digit returns, including dividends, after hitting $1 trillion.\nThere are risks, of course. A market downturn would pull Apple down with it. A trade war with China would be particularly harmful, affecting Apple’s supply chain and a key growth market. And Apple seems to be lagging behind in some promising markets, like voice assistants and home automation, where Amazon (AMZN) is making gains. Amazon stock has outpaced Apple in recent months. With a recent market value of $771 billion, Amazon is headed for $1 trillion faster than we predicted.\nBut a few points on Apple from our cover story still hold. It and Samsung (SSNLF) have formed a duopoly for high-end smartphones. Customer retention is high for both companies, but it is exceptionally high for Apple, making new phone purchases a matter of when, not if. Free cash flow of $65 billion a year provides Apple vast resources to invest in future product development. And swelling service revenue is helping to smooth out earnings growth from year to year.\nApple’s stock buybacks are a wash in the race to $1 trillion, because the falling share count will offset the higher value per share. But while a colossal market value is something to marvel at, healthy shareholder returns are the bigger goal, and Apple looks poised to continue delivering those for years.\nSign up to Review & Preview, a new daily email from Barron’s. Every evening we’ll review the news that moved markets during the day and look ahead to what it means for your portfolio in the morning."