2 Companies That Think They Can Be the Next Apple (AAPL)

2 Companies That Think They Can Be the Next Apple (AAPL)

Apple Inc. (NASDAQ: AAPL) is the world's largest publicly traded company, with a market capitalization of $541.11 billion as of July 14, 2016. Apple is a leading multinational technology company that designs and manufactures everything from computers to mobile devices to portable digital music players. Because of its success, many companies are striving to imitate Apple and even surpass it. Here's a look at two aspiring companies.

Huawei Technologies

Huawei Technologies Co. Ltd. (002502.SZ) was founded in 1987 and has grown from a small company with an annual revenue of just $5,680 to an annual worldwide revenue of over $60 billion in 2015.

Huawei Technologies has become a multinational telecommunications equipment and networking company with over 140,000 employees. Its products and services are offered in over 100 countries across the globe. The company operates in three core segments: telecommunications carrier networks, enterprise business and devices, and manufacturing communication devices.

Can Huawei Be the Next Apple?

Huawei is an ambitious company that set a goal to become the world's top smartphone producer within five years. In 2015, Huawei was the third-largest smartphone company in the world, but it was the global leader in the telecommunications equipment market. Huawei was the largest filer of international patent applications in 2014 with 3,442 patent applications, and in 2015 with 3,898 applications.

Apple did not place in the list of top technology companies in terms of the number of international patent applications it filed. Patents have been playing a large role in the mobile market. Apple is having a tough time navigating the mobile market in China because regulators insist that foreign companies follow Chinese rules.

Huawei has been building on its large intellectual property portfolio with its extensive research and development (R&D) investments. Its progress has caused Apple, one of its main competitors, to agree on a licensing deal in which Apple pays royalties for Huawei's patents. In the beginning of 2016, the head of Huawei's consumer business segment told its engineers at its Beijing research centers that the company would spend more money on R&D, and that it could be as big as Apple.

Tesla Motors

Tesla Motors Inc. (NASDAQ: TSLA) is one of the world's most innovative technology companies. It designs, manufactures and distributes electric vehicles, battery products and electric vehicle powertrain components. Tesla has entered into strategic partnerships with other companies, including Panasonic, to reduce its cost of lithium-ion battery packs for its vehicles. The electric automaker and its partners have begun construction of a gigafactory in Nevada in an attempt to produce a mass-market affordable electric vehicle, the Tesla Model 3. By 2020, Tesla estimates that its Nevada-based gigafactory would produce more lithium-ion cells than the world's combined output in 2013.

Is Tesla Motors the Next Apple?

As of July 13, 2016, Tesla had a market capitalization of $29.67 billion, which is only 5.5% of Apple's market capitalization. In 2015, chief executive officer (CEO) Elon Musk stated that Tesla's market capitalization would equal or surpass Apple's market cap in 10 years. Musk's confidence in the company stems from the company's move to spend an overwhelming amount of money on capital expenditures (CAPEX) in an attempt to generate a good return on investment (ROI). Tesla is spending its money on building charging networks and on its gigafactory.

Between Dec. 31, 2013 and Dec. 31, 2014, Tesla grew its revenue from $2.01 billion to $3.2 billion, or an impressive 59.2% increase. Between the 2014 fiscal year end and the 2015 fiscal year end, Tesla grew its revenue by over 25%, from $3.2 billion to $4.05 billion. Musk is highly confident that Tesla will continue its double-digit revenue growth and have a price-to-earnings (P/E) ratio of 20. If these figures are realized, Musk projects that Tesla's market cap would be on the order of $700 billion.