Will Apple Reach $1 Trillion? These Are the Numbers to Watch

(Bloomberg) -- Hoping Apple Inc.'s results provide enough punch to push it over the $1 trillion hump? Besides revenue and profit there's a line on tonight's income statement you should also check: the share count.

Thanks to buybacks, Apple's has been falling, and at a purely arithmetic level that will matter to whether its market capitalization expands enough after the close to make it the first U.S. company with a 13-digit valuation. (Arguments about whether buybacks raise stock prices are for another story.)

Obviously, a lot of things must go right -- the stock needs to rally, most importantly. But if that happens the share count suddenly becomes a question, and not one with a totally straightforward answer.

As things stand, Apple shares must climb to $203.45 to get to $1 trillion, a gain of about 7 percent from its price of $190.06 as of 11:40 a.m. in New York. Inconveniently, however, that math is based on a tally of outstanding shares from early May that has certainly shrunk since the last official update.

Apple has bought back so much stock in recent years that its share count now stands at three-quarters of what it was at its peak in 2012. On average, the iPhone maker's shares outstanding have fallen 1.3 percent every quarter since, which would imply a monthly decline of about 0.4 percent.

Back-of-the-envelope, applying those percentages to the interval since Apple's last update would result in outstanding shares of 4.851 billion, requiring a stock price of just over $206 to trip $1 trillion. Getting there requires an 8.5 percent rally.

Investors won't have a full picture of the effect of the latest round of repurchases until the figure is updated in the quarterly release. So a fair amount of on-the-fly math will be required if the stock takes off.

And that's not the only complication. The best summing of Apple's shares is its quarterly 10Q filing with the Securities and Exchange Commission, which gives a real-time count but normally isn't filed until the day after the earnings release. Tuesday's report will likely deliver the count through June 30. In other words, the figure that becomes available tonight will still be about a month old.

“This is all kind of holding your thumb up going, eh, about right,” said Kim Forrest, senior portfolio manager at Fort Pitt Capital Group LLC in Pittsburgh.

The Cupertino, California, company bought back a record amount of shares in the first quarter. In fact, nine of the 20 largest quarterly repurchases ever carried out by U.S. companies were by Apple.

Needless to say, anything could happen. The stock could fall, rise too little, or rise so much that no reduction in shares will matter to the trillion-dollar question. And all of this will be moot about 12 hours later when the official share count is printed in the 10Q. Until then, though, some vigilance will be warranted.

--With assistance from David Wilson.

To contact the reporter on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Brendan Walsh

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