After a difficult 2022, tech giant Apple Inc. (ticker: AAPL) is off to a hot start in 2023. Through Sept. 21, AAPL stock is up 34.4% this year, outpacing the S&P 500’s 12.8% gain over the same period.
Outperformance is certainly a familiar concept for Apple investors over the past 20 years. Since the start of 2003, Apple’s market capitalization has grown from just $5.2 billion to around $2.75 trillion, making it the most valuable public company in the world.
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As of 2023, Apple shares have still been hitting fresh new all-time highs, emphasizing the fact that buying the dips in Apple stock has historically been a shrewd move for long-term investors.
Apple’s 20-Year Journey
In 2023, it’s difficult to imagine a world of phones and personal electronic devices that is not dominated by Apple. However, way back in 2003, Apple wasn’t even in the smartphone business.
Apple launched the first iPhone in 2007. Over the 16 years that followed, Apple has sold more than 2.3 billion iPhones, making it one of the most successful and profitable products of all time.
When iPhone growth began to slow starting in 2016, Apple made the aggressive decision to pivot its focus from hardware sales to recurring services revenue. In 2022, Apple’s services alone, including its App Store, iCloud and Apple Care businesses, generated $79.4 billion in revenue, more than the total revenue of Fortune 500 companies like Intel Corp. (INTC), Boeing Co. (BA) and Nike Inc. (NKE).
Apple’s stock has performed so well in the past two decades that the company has completed three stock splits over that time: a 2-for-1 split in 2005, a 7-for-1 split in 2014 and a 4-for-1 split in 2020.
During the global financial crisis of 2008, Apple took a hit along with the rest of the market. Shares finished 2008 down 56.9%, its worst annual performance of the past 20 years. Fortunately for Apple investors, the sell-off didn’t last long. In fact, after hitting its low point of the crisis in January 2009, Apple shares were back at all-time highs once again by October 2009.
Apple investors also dealt with uncertainty surrounding the transition of power when visionary co-founder and CEO Steve Jobs was diagnosed with pancreatic cancer in 2003. Jobs stepped down from his position as CEO in August 2011 and died roughly two months later. Jobs was replaced by Chief Operating Officer Tim Cook, and plenty of investors were skeptical about Apple’s ability to continue to grow without Jobs at the helm. Cook quickly proved his detractors wrong, however, and Apple shares gained more than 76% in his first 12 months as CEO.
The iPhone wasn’t the only key product launch for Apple in the past 20 years that fueled the stock’s meteoric rise. Apple launched the iPad in 2010, the Apple Watch in 2015 and the HomePod smart speaker in 2018. In June 2023, the company announced its newest product: a mixed-reality headset called the Apple Vision Pro. The device won’t be available until early 2024 and carries a hefty $3,499 price tag, but the device may be able to move the needle for Apple in the coming years as the company develops the product.
Today, Apple investors are in good company. Legendary billionaire investor Warren Buffett began buying AAPL stock for his Berkshire Hathaway Inc. (BRK.A, BRK.B) portfolio in early 2016 and has been adding to his position ever since. Buffett now holds about $160 billion in Apple stock, making it Berkshire’s largest public stock holding by far. In fact, Berkshire holds more than five times more AAPL stock than any other public stock.
The Numbers on Apple Stock
Apple’s ability to continue to innovate has helped the company grow its revenue by 6,430% and its net income by more than 137,800% over the past 20 years. In 2022, Apple reported a staggering $394.3 billion in revenue, up 7.8% year over year. Apple’s $99.8 billion in net income in 2022 was also up 5.4%.
Over the past 20 years, Apple shares have generated a total return of roughly 50,720% compared to a 318% total return for the S&P 500 during that stretch. Those gains translate to a 36.6% compound annual growth rate for Apple compared to a 7.4% CAGR for the S&P 500 in that time.
That means that $10,000 in AAPL stock purchased 20 years ago would be worth about $5.08 million today, assuming reinvested dividends.
Analyst Outlook
Even after those extremely impressive long-term returns, Wall Street analysts remain bullish on the iPhone maker. Among the 38 analysts covering Apple stock, Apple has 32 “buy” or “strong buy” analyst ratings compared to just six “hold” ratings and no “underperform” or “sell” ratings. The average analyst price target for AAPL stock is $199.58, implying a 14.7% upside from its Sept. 21 closing price.
CFRA Research analyst Angelo Zino says Apple’s growing ecosystem of loyal customers and its expanding addressable market are excellent reasons to own Apple stock.
“Despite macro uncertainty, we think AAPL’s premium valuation is warranted given stable (free cash flow) generation, aggressive capital allocation strategy, and management ability to execute,” Zino says.
“We forecast further upside to average selling prices in the coming years (e.g., foldable phones), while ongoing growth within the installed base should keep services expansion intact (e.g., advertising, gaming, bundling).”
CFRA has a “buy” rating and $220 price target for AAPL stock, which closed at $173.93 on Sept. 21.
However, Morningstar analyst Brian Colello doesn’t think Apple shares represent a compelling value at their current levels.
“Overall, we’re delighted with Apple’s innovation within these devices,” Colello says, referencing Apple’s newest iPhone 15 unveiling. “The firm continues to show off its cumulative expertise (and competitive advantage) in hardware, software, services and semiconductors. Nonetheless, with shares trading around $175, we continue to view shares as modestly overvalued as we foresee only mid-single-digit revenue growth for the company over the next few years,” Colello says.
Morningstar gives Apple stock two stars in its five-star rating system, and a fair value of $150, indicating shares are currently overvalued. Time will tell which analyst is directionally correct on Apple; the bullish analysts have certainly been more on target for the past two decades.
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How Much Would $10,000 Invested in Apple Stock 20 Years Ago Be Worth Today? originally appeared on usnews.com
Update 09/22/23: This story was published at an earlier date and has been updated with new information.
