Apple (AAPL +2.65%) has long been a prime example of what innovation and savvy business practices look like. After all, you don't get to be the world's most valuable public company by accident. Apple's journey has revolutionized the tech world and made a lot of investors rich along the way.
Since the beginning of 2003, Apple's total return has been over 8,800%. So if you had invested $10,000 in the company back then and held on through all the intervening years while reinvesting your dividends, your stake would be worth over $8.8 million today.
Of course, it's easy to look at a company like Apple's success in retrospect and think about how you might've missed a once-in-a-generation opportunity, but I believe it is still in the relatively early phases of what it can be. Apple should continue to make plenty more millionaires.
On June 30, 2023, Apple became the first public company to reach a market capitalization of $3 trillion -- doubling its value from about three years prior. It's unreasonable to assume it could double its market cap again in the next three years, but I think a $100,000 investment today could hit the $1 million mark in 20 years.
NASDAQ: AAPL
Key Data Points
Even growing at half of its recent pace could do the trick
For an investment to hit $1 million from $100,000 in 20 years, it must grow around 12.25% annually, assuming all gains are reinvested to take full advantage of compound interest. For perspective, the S&P 500, which tracks the largest 500 public U.S. companies, historically returns roughly 10% annually over the long run.
Apple should be well-positioned to outpace the S&P 500 by at least 20% annually over 20 years. For perspective, here's how much Apple has outperformed the index over the past decade.
Apple's compound annual growth rate over that time has been over 25%. That doesn't mean it'll continue growing at that rate, but it does highlight its strong track record, which is often a good indicator of the ability to sustain success over the long haul.
Apple's growth will extend beyond the iPhone
Apple's financial success has long depended on the iPhone. In its fiscal 2023 (which ended Sept. 30), the iPhone brought in more than $200 billion in revenue -- over 52% of Apple's total. Having a single product account for that much of your revenue isn't usually ideal, but it used to be much more skewed. The iPhone was 62% of Apple's revenue in its fiscal 2018 (which ended Sept. 29, 2018).
The company's decreasing dependence on the iPhone and the growth of its services segment are two of the trends that give me confidence that it can grow at the rate needed to turn $100,000 into $1 million in 20 years. In its past five fiscal years, services went from around 15% of Apple's revenue to 22%.
I believe Apple can thrive in two high-growth areas: fintech and telehealth. Apple dabbled in both some years ago, but has recently taken its game up a notch. It has made moves in fintech with services like Apple Pay, Apple Card, and Apple Pay Later, and the Apple Watch, iPhone, and iPad's health-focused features have hinted at how it could become a serious contender in the telehealth space.
According to a forecast by Vantage Market Research, the global fintech industry could grow at an average annualized rate of 19.5% until 2030. A paper published in the Journal of Medical Internet Research forecasts that the U.S. telehealth market will reach $140.7 billion in 2030, up from $17.9 billion in 2020.
I believe Apple has the chance to capitalize on these trends and significantly expand its market share in both fintech and telehealth, thanks to its technological expertise and broad market reach (iPhones are in the hands of more than 1 billion people worldwide).
Don't lose sight of conventional investment wisdom
Despite the successes Apple has experienced and the position it's in to continue this success, it's important for investors not to lose sight of the importance of diversification. Is Apple one of the premier blue chip stocks with a bright, lucrative future ahead? I'd say so. Does that mean you should bet the house on it? I'd say no.
Apple should be part of a well-rounded stock portfolio, but it shouldn't be the bulk of it. Nobody can predict the future, and the last thing you want is for your future financial security to rest on the fate of a single company.
Embracing Apple's potential while maintaining a balanced portfolio will allow you to benefit from its growth while hedging yourself against the unpredictable nature of markets.
