Tech giant Apple Inc. (ticker: AAPL) has only grown in stature this year. Through Nov. 20, AAPL stock is up 19.5% in 2024, including dividends. Not bad for a company now worth $3.5 trillion.
But Apple hasn’t always been one of the top two most valuable companies in the world — 20 years ago, the tech giant had a humble market cap of around $12 billion.
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Despite its ferocious multi-decade rally, Apple shares have still been hitting fresh new all-time highs in 2024, 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 2024, it’s difficult to imagine a world of phones and personal electronic devices that is not dominated by Apple. However, way back in 2004, Apple wasn’t even in the smartphone business.
Apple launched the first iPhone in 2007. Over the 17 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 in 2016, Apple made the aggressive decision to pivot its focus from hardware sales to recurring services revenue. In fiscal 2024, Apple’s services alone, including its App Store, iCloud and Apple Care businesses, generated $96.2 billion in revenue, more than the total revenue of Fortune 500 companies like Intel Corp. (INTC), Visa Inc. (V) 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 February 2024, the company released its newest product: a mixed-reality headset called the Apple Vision Pro. The product carries a hefty $3,499 price tag, but the device may be able to move the needle for Apple over time as the company develops the product, which for now is essentially for hobbyists.
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. Though he has been selling recently, Buffett now holds about $68 billion in Apple stock, making it Berkshire’s largest public stock holding by far. In fact, Berkshire holds about 1.5 times more AAPL stock than his next-largest position, which is Bank of America Corp. (BAC).
The Numbers on Apple Stock
Apple’s ability to continue to innovate has helped the company absolutely balloon its financials over the last two decades. Between fiscal 2003 and fiscal 2023, Apple grew revenue from $8.3 billion to $391 billion (4,823% growth) and its net income from $276 million to a staggering $93.7 billion (33,962% growth).
Over the past 20 years, Apple shares have generated a total return of roughly 27,086% compared to a 393% total return for the S&P 500 during that stretch. Those gains translate to a 32.3% compound annual growth rate (CAGR) for Apple compared to an 8.3% CAGR for the S&P 500 in that time.
That means that $10,000 in AAPL stock purchased 20 years ago would be worth more than $2.71 million today, assuming reinvested dividends. The same amount invested in the S&P 500 20 years ago would be worth $49,309 today with dividends reinvested.
Analyst Outlook
Even after those extremely impressive long-term returns, Wall Street analysts remain bullish on the iPhone maker. Among the 34 analysts covering Apple stock, Apple has 24 “buy” ratings compared to just eight “hold” ratings and two “sell” ratings.
CFRA Research analyst Angelo Zino says Apple’s growing ecosystem of loyal customers, expanding addressable market and on-device AI are excellent reasons to own Apple stock.
“Despite macro environment uncertainty, we think AAPL’s premium valuation is warranted given stable (free cash flow) generation, aggressive capital allocation strategy, and management’s 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 $260 price target for AAPL stock, which closed at $229 on Nov. 20.
However, Morningstar analyst William Kerwin doesn’t think Apple shares represent a compelling value at their current levels, assigning the stock a two-star rating and a fair value estimate of $200 per share.
“We believe iPhone revenue growth, Apple’s largest driver, is slowing throughout cycles in a mature smartphone market and with growth headwinds out of China … we believe the expectations priced into the stock are lofty and reflect the overexuberance surrounding AI,” Kerwin says.
Time will tell which analyst is directionally correct on Apple; the bullish analysts have certainly been more on target for the past two decades.
[See: Artificial Intelligence Stocks: The 10 Best AI Companies.]
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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 11/21/24: This story was published at an earlier date and has been updated with new information.
