Is It Too Late to Buy Apple Stock?
As the world’s most valuable company with a market cap of $2.39 trillion, Apple (AAPL 0.25%) shares appear to be well past the best time to buy. However, the tech industry is made up of dozens of solid growth stocks for a reason. It is a market that consistently has one eye on the future, with many companies in a constant state of development and innovation.
So, while Apple’s stock has soared more than 117,000% since it first went public in 1980, it’s not too late to invest in the technology leader. Here’s why.
Apple has reliable long-term growth
Last year was challenging for the entire tech market, with the Nasdaq 100 technology sector index down 40% throughout 2022 as macroeconomic headwinds led to a decline in consumer demand. In the same period, Apple shares fell 27%, a more moderate decline than its peers, with Alphabet’s stock down 39%, Nvidia’s 50% and Advanced Micro Devices’ 55%.
Apple’s stock decline in 2022 highlighted its impressive long-term growth and the importance of sustaining such investments through economic downturns. Despite the sell-off, Apple’s share price is still up 286% over the past five years and 789% over the past 10 years. In fact, a $20,000 investment in Apple in 2018 would be worth $57,200 today.
The excellent stock growth came along with consistent earnings. In the past five years, Apple’s annual revenue rose 48% to $394 billion, while operating income rose 68% to $119 billion. The company has almost unparalleled brand loyalty, which enables its products and services segments to continue to expand regardless of short-term headwinds.
Apple is always looking to the future
Numerous reports over the years suggest that Apple has several secret projects in development, such as autonomous cars, mixed-reality headsets, foldable phones, touchscreen laptops, and more. The tech giant has significant market share in its current range of products, which include smartphones, tablets, personal computers and wearables, but it also keeps a keen eye on the future.
For example, according to a Bloomberg report, Apple is expected to release an augmented/virtual reality (AR/VR) headset in 2023. The new device will take the company into the $25.33 billion AR market, which is likely to expand at a compound annual growth rate (CAGR) of 40.9% through 2030 (per Grand View Research). Meanwhile, the VR market is expected to grow at a CAGR of 15% over the same period.
With advances in mixed reality that could apply the technology to various industries in the future, from healthcare to education, Apple will be positioned to take advantage of the burgeoning industry.
Along with technological advances, Apple’s long-term mindset protects its business from potential headwinds. Recent reports have suggested that the company is making moves to increase profits in its highest-grossing segment, the iPhone, by using more internal components in the future. For example, in January, Bloomberg reported that Apple has plans to reduce its reliance on companies such as Samsung and Qualcomm by developing its own iPhone screens and telecommunications chips starting in 2024.
The change will end expensive partnerships with other technology companies, which improve profit margins in the segment. And more profit per iPhone would allow Apple to retain revenue even in the event of an economic downturn, during which it could sell fewer smartphones overall. The company has done a similar thing in its Mac business, moving away from Intel processors (CPUs) and using custom versions it calls Apple Silicon. Since the CPU transition began in June 2020, Mac revenue has increased 62% from $7 billion to $11.5 billion in 2022. Swapping out various iPhone components in favor of custom versions can be incredibly profitable in the long run be.
It may have been 46 years since Apple’s founding, but the company is nowhere near its ceiling. Its constant stock growth over the past five and 10 years reflects its potential for the future. It’s not too late to buy Apple stock, and Apple is, in fact, a screaming investment.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the listed stocks. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Intel, Nvidia and Qualcomm. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long March 2023 $120 calls on Apple, short January 2025 $45 calls on Intel, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.