Some businesses have been so successful over such long periods of time that they have made their earliest investors extremely wealthy. Apple (AAPL 2.15%), whose shares are up 38,000% in the past two decades, is certainly one company that falls on this list.
But investors who missed the boat on this dominant consumer tech titan might be wondering what the future holds. That seems to be the right question to ponder, given that the business carries a monster market cap of $2.9 trillion today.
Could investing $1,000 in Apple right now eventually make you a millionaire?
Running some numbers
Going from an initial $1,000 capital outlay to a $1 million balance means the investment expanded by 1,000-fold. That would be a remarkable gain any way you look at it.
However, we must also consider the time it would take to achieve this. If it happens in 50 years, the annualized return would be 14.8%. If it happens in 20 years, the annualized return would come out to 41.3%.
In the past 20 years, Apple shares have climbed at a compound annual rate of 34.6%. The adage of "past returns don't guarantee future results" rings true in this scenario. I'm extremely confident that this historical gain is not going to repeat itself going forward.
NASDAQ: AAPL
Key Data Points
Rotten Apple
It hasn't been happy days for Apple over the past few quarters. After reporting a 3% sales decline in fiscal 2023 (ended Sept. 30), Apple once again saw its revenue dip, this time by 4%, in the first three months of calendar 2024. But the top-line figure came in ahead of Wall Street estimates.
Despite all of its various product introductions over the years, Apple can still be characterized as a smartphone enterprise. Sales from the iPhone were down 10% year over year. Because this single product represented about half of overall company revenue in Q2, it dragged down Apple's results. It has become clear that consumers don't really feel the need to constantly upgrade to the newest model, especially when updates are not as game-changing as they were in the earlier days.
Apple is also experiencing soft demand in China. Sales in the world's second-biggest economy fell 8%. The smartphone market in this country is becoming increasingly competitive, with domestic businesses giving Apple a run for its money.
The bright spot, as has typically been the case recently, is the growth of Apple's services division, which posted a revenue gain of 14%. Boasting a gross margin of 74%, this segment is still a very small part of the overall company. And it depends on Apple selling more hardware devices.
The outlook doesn't give shareholders much reason to get excited. According to Wall Street consensus analyst estimates, Apple is projected to increase its revenue at a compound annual rate of just under 5% between fiscal 2023 and fiscal 2026.
The bottom line
No one will argue against the belief that Apple is one of the world's elite companies. But that doesn't mean it makes for a smart investment. That's especially the case today, when growth prospects look to be limited.
Plus, it doesn't help the cause when the stock trades at a price-to-earnings ratio of 29. This premium valuation limits the potential to generate strong investment results.
I think at best, Apple shares match the return of the broader market over the long term. So, a $1,000 investment in this business isn't going to make you a millionaire in less than a few decades. Perhaps if you're able to increase that initial cash outlay significantly, then the chances of getting to a seven-figure balance will be much higher.
