Read the article below.

Instructions:

• Write one short 5-line paragraph SUMMARY of the article

• Then a second 5-line paragraph describing the lecture topic the article relates to

• And in the second paragraph state lessons learned

Apple at $2 Trillion Leaves No Room for Error

Apple Inc. AAPL -1.01% became a $2 trillion company on Wednesday. The irony is this shows just how little it can afford to lose.

On Wednesday morning, Apples share price topped the level needed to exceed a $2 trillion market capitalization. That level didnt quite hold at the closing bell. But Apple has still enjoyed a strong run: The stock has averaged a weekly gain of 3.5% since the beginning of June, according to FactSet. Its business has proven surprisingly resilient to the pandemic. The company still generates more than 80% of its revenue by selling high-price devices made almost entirely in China, where the outbreak first occurred. Combined revenue from all those devices grew 10% year over year in Apples most recent fiscal quarter ended June 27. The stock has jumped more than 20% since those results were reported on July 30.

But Apple is also now facing an unprecedented challenge to its App Store business, putting it in the crosshairs of lawmakers and regulators on both sides of the Atlantic. The matter has escalated significantly over the past few days, as Epic Games sued both Apple and Google in federal court after the two companies removed its popular Fortnite video game from their app marketplaces as Epic tried an end run around their respective payment systems. In a new twist Monday, Epic sought a restraining order against Apple to prevent the games removal and to keep Apple from ejecting Epic from its developer program.

Since its launch in 2008, the App Store has grown into a crucial business for Apple. Based on regulatory filings, the App Store has been the largest contributor to the growth of Apples services segment in three of the past four fiscal years. The services segment is now Apples second-largest segment after the iPhoneand the one that has delivered the most steady growth over the past four years as the smartphone business has matured. Service gross margins are also key to Apples overall business model, coming in 34 percentage points higher than the companys product gross margins for the nine-month period ended June 27.

The ultimate outcome of the Epic lawsuit and regulatory probes is impossible to predict. But at $2 trillion, the market is valuing Apple as if nothing could go wrong. At that level, the stock trades at more than 32 times forward earningsor 31 times excluding $81 billion in net cash on the companys balance sheet. That is its highest multiple in more than a decade. It is also about double the multiple the shares fetched when Apples market value first crossed the $1 trillion mark in August 2018.

In other words, all a $2 trillion valuation really means is that Apple investors are now willing to pay twice as much for the same earnings outlook. With a key business under attackand a lot of hype about the 5G Iphone being launched this fall into a weakened global economythats a big bet indeed.