It's hard to find fault with Apple (AAPL 0.78%) stock these days. The tech giant is the most valuable company in the world, with a market cap approaching $3 trillion, and its returns have bucked any concern about the law of large numbers. Apple stock is up more than 1,000% over the last decade and has gained nearly 400% over the last three years.
But after that impressive run, is Apple still a buy? To settle that debate, we had two Motley Fool contributors weigh in on the subject. Keep reading to see whether you're an Apple bull or bear.
Image source: Apple.
Bullish take: Apple has built a robust ecosystem
Parkev Tatevosian: For the last two decades, Apple has been in consumers' lives through the popular electronic devices it's created. Starting with the iPod, then the iPhone and iPad, Apple has done an excellent job revolutionizing consumer technology. Moreover, it introduced several new products in the most recent decade, including the Apple Watch and AirPods. Still, it has also updated the legacy products in ways that have kept them selling millions of units.
The result has been surging revenue and profits for the company founded by Steve Jobs. Indeed, from 2012 to 2021, revenue has increased from $156.5 billion to $365.8 billion. That's a compounded annual growth rate of 12.9% -- not an easy feat for a business of that size and profitability. Of course, it's easier to make sales at low or negative profit margins, but that's not what Apple has been doing.
Between 2012 and 2021, Apple's operating profit has grown from $55 billion to $108.9 billion. Helping fuel the surge in profits is Apple's development of a robust services business, including sales from its app store, Apple Music, Apple TV+, and more.
Collectively, Apple's services segment generated sales of $68.4 billion in the fiscal year 2021, up from $53.7 billion in 2020. That's vital because the services segment is far more profitable than product sales. It costs the company more money building and selling an iPhone than it does for it to take a commission on sales in its app store.
Folks buy services from Apple to put on their Apple devices, which deepens its connection with consumers. When it comes time to upgrade a phone or a tablet, it's more likely the consumer will choose another Apple product. Thus, its virtual cycle can go on as long as Apple can keep executing quality upgrades to legacy products and timely introductions of new ones.
Bearish take: The tech world is changing
Jeremy Bowman: There's no question Apple has dominated the mobile tech era. The iPhone is the market-share leader in key markets like the U.S., and the company has an impressive ecosystem of devices that reinforce its brand and create stickiness.
Its installed base of devices is now well over 1.5 billion. However, past performance is no guarantee of future returns in the stock market, and the tech world appears to be on the precipice of a dramatic shift.
Momentum is quickly accelerating toward the metaverse and Web3 -- what some observers describe as a decentralized, physical internet where users engage through hardware like virtual reality (VR) headsets rather than smartphones and tablets. Apple has historically built in private, keeping its plans secretive. There are reports that it's developing its own VR devices, but the company has yet to release anything, and so far has ceded the market to Facebook-owner Meta Platforms and others.
Tech shifts generally bring about new market leaders. The transition to mobile tech toppled Microsoft, Apple's longtime rival, and anointed Apple, and its services business has become a profit machine. But developers are already shifting their focus to the next-gen platforms like the blockchain, the metaverse, and Web3. Apple's App Store dominance will be irrelevant there if it doesn't control the hardware.
Additionally, Apple's stock price looks inflated today, as it's had a lot of growth pulled forward by the pandemic and the iPhone 12 release. Therefore, the company's growth is likely to slow significantly over the next few years, so there's a good chance Apple underperforms the market.
Apple and CEO Tim Cook deserve plenty of credit for the company's booming growth, but its place in the next decade of technology still seems uncertain, despite its manifest competitive advantages. Still, after the recent growth, it will take a lot to convince Apple bulls that the company's best days are behind it.
