How Aramco Surpassed Apple To Become The Most Valuable Company Worldwide?: A Comparative Financial Analysis


How Aramco Surpassed Apple To Become The Most Valuable Company Worldwide?

Oil giant Saudi Aramco has gained the crown of the most valuable company worldwide, beating Apple Inc. The recent surge in oil prices has boosted the entire energy market this year. As a result, Saudi Aramco's stock price has skyrocketed. In comparison, tech giant Apple Inc has faced issues like global inflation, fallen stock, and a global pandemic.

According to Refinitiv, Apple is currently worth about $2.37 trillion, while Aramco's worth is about $2.43 trillion. However, the question of how Aramco surpassed Apple to become the most valuable company worldwide has certainly popped into your mind. What are the core reasons?

Apple Inc.- At A Glance

Apple Inc. (NASDAQ: AAPL) is a multinational technology company founded by Steve Wozniak, Ronald Wayne, and Steve Jobs in 1976. It designs, manufactures and markets consumer electronics, computer software and online services, the company has grown to become a household name with products such as the iPhone, iPad, and Macbook. Apple became the most valuable public company in the world in 2011 with a market capitalization of more than $630 billion. Apple has achieved this success through its forefront innovation and prudent corporate strategies.

Saudi Arabian Oil Co. - At A Glance

Saudi Aramco (TADAWUL: 2222), formally known as Saudi Arabian Oil Co., is a global oil and gas conglomerate that ranks first in the world in crude oil production and exports. The company has been a key player in the global oil and gas market, with operations in over 25 countries. As a leading chemicals and energy company, they produce approximately 1/8th of the barrels of crude oil in the world, making it a critical player in the global energy market.

The business was founded by Chevron in 1933. Saudi Aramco enables persistent economic prosperity and growth around the world. Now, they have become the most valuable company worldwide.

Current Financial Profile: Apple Vs. Aramco

Particulars

Apple

Saudi Aramco

Market Cap

$2.37 Trillion

$2.43 Trillion

P/E Ratio

24.29

18.463

EPS

6.14 (current year)

2.67 (current year)

Dividend & Yield

0.59%

0.3198% (Q1)

Avg. Volume (1 month)

108.56M (June 1, 2022)

258.25 (June 1, 2022)

4 Reasons Why Aramco Could Take Over Apple

How Aramco Surpassed Apple To Become The Most Valuable Company Worldwide?

Worldwide Inflation

As stated by AFP, the largest oil supplier corporation Saudi Aramco has become the biggest company globally in terms of market capitalization. Global inflation caused a drop in consumption which raised demand. The inflation numbers have been increasing across the globe. The rate has reached the top figure in the last 40 years in the US. As a consequence, it has led to falling demand for technology stocks. Investors have begun to be concerned over the tech company costs and supply chain adversities.

As a result, worldwide inflation was a prime reason for Aramco to surpass Apple's position as inflation had weakened the spending habits of consumers.

Hike In Oil Price Due to Invasion In Ukraine

The Ukraine-Russia conflict has raised the price of global energy. Ultimately, every energy company has seen substantial-top to bottom growth. Due to the invasion of Ukraine, oil rose to a thirteen-year high of $130 per barrel. While prices have recovered, Brent crude is trading at about $105 per barrel today in contrast to the beginning of this year when it was $77.

Therefore, spiking oil prices due to the invasion of Ukraine is another reason for Aramco to overtake Apple.

Expense Management Due To COVID Pandemic

Talking about COVID-19, the revenue distribution of Apple has altered. In addition, with the store closures in 2020, massive disruption of the product supply chain was seen.

Any supply chain disruption will significantly change Apple’s ability to be profitable. Eventually, the expense management system failed. It crunched the consumer wallets. Investors had lost their faith in investing in the stock market of the Apple tech industry.

Even a global pandemic couldn't stop Aramco from managing its expenses. On the other hand, Apple was miserable in managing expenses due to work from home policies during the Covid crisis.

Production Backlog Due to COVID Lockdown in China

Coronavirus stood as a potential risk point for Apple as it is strongly dependent on manufacturers' supply chain in China. The company had said that the Chinese lockdown would lead to super strain on their supply chains. By June 2020, it harmed the company figures by approximately $4-$8 billion. Indeed, the production backlog due to the Covid lockdown in China is a vital factor for Aramco to eclipse Apple.

Can Apple Reinstate The Top Position In Foreseeable Time?

Apple might not be able to regain the top position in the foreseeable future. The impact of the invasion of Ukraine by Russia, the recurrent Covid lockdowns in China, and soaring inflation have created an environment of intense economic turmoil to endure. As a result, Apple had expected better results in March 2022. Rising supply chain limitation has changed geopolitical scenarios and the marketing of Apple Inc.

The company is currently experiencing intense silicon shortages and several other issues. In contrast, oil giant Aramco is getting bumper earnings and revenues more than ever. Last year, their profits doubled. The Ukraine-Russia conflict has made energy prices unfathomable.

Aramco is a low-cost production oil company. So, Apple has little chance of reinstating the top position. Nevertheless, the rest is yet to be seen in the upcoming future!

Conclusion

Overall, we can now conclude the discussion of how Aramco surpassed Apple to become the most valuable company worldwide.

We have discussed a comparative financial analysis. This year, the surge in food and energy prices leaves consumers with little money to invest in non-essential products like technology products. It is one of the main reasons for Aramco to surpass Apple.