Apple's (AAPL 1.12%) stock price has rallied about 460% over the past five years, defying the bears who claimed its heyday was over. The tech giant's annual revenue rose from $215.6 billion to $274.5 billion between fiscal 2016 and 2020, while its annual net income grew from $45.7 billion to $57.4 billion.
But can Apple maintain that momentum over the next five years? Let's examine its long-term roadmap to find out.
The next two years
Analysts expect Apple's revenue to rise 21% in fiscal 2021, then grow another 4% in 2022. Most of that growth will come from new hardware devices and the expansion of its services ecosystem.
The iPhone 12, Apple's first family of 5G devices, is expected to spark a fresh wave of upgrades this year. It could ship 230 million iPhones in 2021, according to recent estimates from its suppliers, which would represent 14% growth from 2020 and mark the flagship device's best year since 2016.
Strong shipments of the iPhone, which generated half of Apple's revenue in 2020, should tether more users to its growing services ecosystem, which includes the App Store, Apple Music, Apple TV+, Apple Arcade, Apple Pay, and other services. Apple generated 20% of its revenue from those services last year, and it recently surpassed 600 million paid subscribers across the entire ecosystem.
Apple will continue to leverage the strength of its hardware business and closed ecosystem to lock in its users, which could lead to more conflicts with companies like Spotify, Netflix, and Amazon. Those conflicts could be costly, but Apple was still sitting on nearly $196 billion in cash and marketable securities last quarter -- so it can easily afford to challenge those entrenched rivals.
As for the rest of its hardware business, investors should expect Apple to launch new versions of the Mac, iPad, Watch, and AirPods each year. Its new Macs will run on Apple's own ARM-based CPUs instead of Intel's x86 CPUs, and it might install even more of its first-party chips into its other devices to tighten up its supply chain, differentiate its devices, and boost its margins.
The expansion of its AR business
Apple is reportedly developing an augmented reality (AR) headset, according to The Information, with a target launch date of 2022. It could follow up that device with a lighter pair of AR glasses in 2023.
The details about these long-rumored devices are scarce, but they could help Apple keep pace with Microsoft (MSFT 2.35%) and Facebook (META 3.87%) in the nascent virtual and augmented reality markets. Microsoft's HoloLens is still a pricey developer-oriented device, while Facebook reportedly plans to expand its Oculus VR business into the AR market with lightweight glasses between 2023 and 2025.
Apple often disrupts markets it didn't create by letting the early movers expose their flaws first. It did this with MP3 players, smartphones, tablets, and smartwatches before -- and it could take a similar approach to AR glasses, which still haven't gained mainstream momentum over the past few years.
A successful launch of the "Apple Glasses" would complement its iPhone, Apple Watch, AirPods, and other devices to lock users into its ever-expanding ecosystem. It would also further reduce Apple's dependence on the iPhone, and possibly pave the way for the launch of its "Apple Car" several years later.
Apple is reportedly developing an electric driverless vehicle, and it's held talks with several automakers to manufacture the car. Analysts expect the car to launch sometime between 2024 and 2027, and think it will likely sport a full suite of Apple's software and AR services. Together, Apple's AR devices and automotive efforts could finally help it expand beyond the iPhone and evolve into a diversified tech giant.
Higher dividends and bigger buybacks
Apple's core business still has plenty of room to grow, and it will likely continue to reward patient investors with higher dividends and bigger buybacks.
Apple only pays a forward dividend yield of 0.6% today, but its low payout ratio of 22% indicates it has plenty of room for future hikes. Apple already reduced its outstanding shares by more than 20% over the past five years, and that reduction should continue for the foreseeable future.
So where will Apple's stock be in five years?
It's impossible to tell exactly where Apple's stock will be trading by the end of 2025, but I believe it will outperform the S&P 500 by a significant margin.
Its core businesses are still strong, it has plenty of irons in the fire, and its stock still trades at less than 30 times forward earnings. The stock could still go through some wild swings, but investors who simply hold Apple -- instead of trading it -- could be well-rewarded over the next five years.