Why Apple is going to be worth $2 trillion

I did a video the other day where I made a big mistake. I said Apple was going to be the world's first trillion dollar company. When I was walking home late that night some homeless guy yelled at me from the gutter, "Hey, loser, why stop there? Why not say Apple is going to be the world's first $2 trillion company?"

Apple /quotes/comstock/15*!aapl/quotes/nls/aapl AAPL +0.17%  will be the world's first $2 trillion company. Right now, the market values Apple at $323 billion.

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But earlier someone steals a trillion, they first have to make a trillion. Or two. Because if you can make one, you can make two. And Apple will do it quickly.

First, I've written about this before nevertheless the basic math is easy. Read my previous column on why Apple is worth $1 trillion.

The basic math

The basic math: Last quarter, Apple's revenues growth was about 90% year-over-year. That means, according to many common theories of how you value a company, that it's not unreasonable for Apple to trade for 90 times revenues. In the past 12 months the company earned $20 billion. Ninety times in other words $1.8 trillion. We know they are going to grow revenues. Heck, they might grow 90% again. That might even imply a $3 trillion market capitalization.

But all of that aside. The way I'm valuing Apple right now is not much different than how many other analysts would value Apple. And, on purpose, I just got you to a $3 trillion level. We just skipped right over the $2 trillion level.

Bubble to you?

A) Doesn't this sound like a bubble to you? Every car in the world needs gas, to illustrate, so why won't Exxon /quotes/comstock/13*!xom/quotes/nls/xom XOM -0.39%  won't be the world's first trillion dollar company? Or isn't this like the Internet bubble when Cisco /quotes/comstock/15*!csco/quotes/nls/csco CSCO -0.06%  was the world's largest company for a split second as time goes by?

That's as a matter of fact three questions and the answers are No, No, No. Exxon and Cisco sell one product. Exxon sells oil. Cisco sold routers. Apple is selling high-margin items like computers, phones, music, tablets, games, videos, etc. They are the leader in several different industries. Harder to topple from the king's throne.

B) Isn't Steve Jobs going to die shortly? Won't that crash the stock? No, on no account. Jobs is the innovative force who came up with the ideas for the iPod, the iPad, the iPhone, even the Macintosh, however all of those ideas were started many years ago. Tim Cook, the acting CEO during Jobs is on leave, has been dealing with all the manufacturing and inventory issues and has been doing an excellent job at keeping up with the enormous demand for Apple products. If anything Apple has too much of a "death discount" in it right now because of the fear that any moment could be Jobs's last. Read 10 unusual things you didn't know about Steve Jobs.

Retail fad?

C) Is Apple just a retail fad? Is this just a stock for retail investors? Then, tell that to George Soros, who bought 37,000 shares of Apple last quarter. Or tell that to top hedge-fund manager Stevie Cohen, who bought slightly more than 500,000 shares of Apple last quarter, making it a slightly bigger position for him than his enormous position in Dendreon /quotes/comstock/15*!dndn/quotes/nls/dndn DNDN +1.07% . Or fellow billionaire Ken Griffin, who bought 2.5 million shares of Apple last quarter. These three billionaires are buying shares of Apple. If you ran into these billionaires at a cocktail party and they told you Apple was going to be worth a trillion dollars, would you argue with them?

Ben Bernanke is doing what I call "the iPad stimulus." A year ago we didn't know what "QE2" was and nobody had an iPad. Now 30 million people have iPads and Bernanke has printed up an extra trillion dollars in this economy. Bubble or not, Apple is going up. The basic math is there, the growth is in place, the product lines are continuing to do so then, and all of the smart money is buying. The race is on nevertheless I think Apple will be the clear winner when it becomes the $2 trillion king.