Apple (AAPL 0.52%) went public in 1980 at $22 per share. If you had invested $3,000 in that scrappy computer maker's IPO, your 136 shares would have grown to 30,464 shares through five stock splits, and your initial investment would be worth about $4.69 million today.
However, you could have jumped on the Apple bandwagon much later and still reaped massive multibagger gains. Let's turn the clock forward to 2007, 10 years after Steve Jobs returned to the company as its CEO.
That was the year Apple launched its first iPhone. If you had invested $3,000 in Apple on Jan. 9, 2007 -- the day Jobs announced the iPhone -- your investment would be worth over $139,000 today. Let's see why that one device turned Apple into one of the market's hottest growth stocks.
Image source: Apple.
How Apple disrupted the smartphone market
Apple didn't create the first smartphone. Instead, it disrupted that enterprise-facing niche -- which was dominated by BlackBerry and Nokia at the time -- with simple touchscreen-based devices.
That streamlined approach, which eliminated the need for cramped physical keyboards, opened up the floodgates for a new generation of touchscreen-based mobile apps. In 2008, it centralized the distribution of both first-party and third-party apps by launching its App Store.
At the time, many critics believed the iPhone would fail. Microsoft's then-CEO Steve Ballmer claimed there was "no chance" the iPhone would dent the smartphone market, Intel refused to develop the iPhone's mobile chips because it didn't believe Apple would ever sell enough phones to justify its own expenses, and TechCrunch's Seth Porges predicted the iPhone would "bomb."
In fiscal 2007, which ended in September of that year, Apple only shipped 1.4 million iPhones. But that figure soared to 11.6 million in fiscal 2008, and it continued climbing to a peak of 231.2 million shipments in fiscal 2016 with the best-selling iPhone 6 and 6s.
The market's demand for new iPhones has cooled off since then, but Apple still shipped an estimated 228.4 million iPhones in 2021, according to Strategy Analytics. It also controlled 17% of the global smartphone market in the second quarter of 2022, according to Canalys, putting it in second place behind Samsung's 21% share. In terms of premium devices over $400, Apple controlled 62% of the market in the first quarter of 2022, according to Counterpoint Research.
How did the iPhone light a fire under Apple's stock?
Apple had already experienced a rebirth under Steve Jobs with the launches of the iMac in 1998 and the iPod in 2001. However, the iPhone went on to eclipse all of Apple's other business segments to become its primary source of revenue. In fiscal 2021, Apple generated 52% of its revenue from the iPhone, compared to 50% of its revenue in fiscal 2020.
Apple subsequently launched the iPad in 2010, which expanded the niche market of tablet computers into a mainstream one, before Jobs passed away in 2011. Many investors questioned Apple's ability to continue growing after Jobs' passing, but his successor Tim Cook continued to expand its hardware business with the Apple Watch, AirPods, and HomePod smart speakers. Cook also strengthened Apple's Services division with new subscription-based services like Apple Music, Apple TV+, and Apple Arcade. As of its latest quarter, Apple had locked in 825 million paid subscriptions across all of its services.
It was also sitting on $193 billion in cash and marketable securities, which gives it plenty of room for fresh investments in newer markets like augmented reality, virtual reality, and connected vehicles.
Between fiscal 2007 and fiscal 2021, Apple's revenue skyrocketed from $24 billion to $365.8 billion, representing a compound annual growth rate (CAGR) of 21.5%. Its net income surged from $3.5 billion to $94.7 billion, representing a CAGR of 26.6%. Over the past decade, the company also reduced its number of outstanding shares by 38% with generous and well-timed buybacks.
Will Apple remain a rock-solid investment?
Apple is now worth $2.5 trillion, so it seems doubtful it will replicate its historic gains from the past 14 years. However, I firmly believe its stable growth rates, the strength of its evergreen brand, its fortress balance sheet, and its ability to disrupt other markets all make it a solid long-term investment.
