Apple (AAPL +1.38%) is a business that needs no introduction. The massive consumer tech enterprise has become an iconic brand, thanks to its popular products and services that are used by consumers across the globe. This positioning has made the company one of the world's most valuable, with a current market cap of $3.1 trillion.
This "Magnificent Seven" constituent has been a huge winner, with the stock up 119% in the past five years (as of July 9). That performance comes in ahead of the S&P 500 index even though shares of the company are 19% below their peak.
Where will Apple stock be in five years?
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Apple will remain a dominant force
Without a doubt, Apple has developed one of the strongest brands on the planet. Hardware devices like the iPhone, MacBook, and AirPods, as well as services such as Music, Pay, the App Store, and advertising, have contributed to the company's success. There are roughly 2.4 billion active Apple devices out there. And the leadership team says that Apple now has more than 1 billion paid subscriptions. These are crazy numbers.
This has made Apple a dominant force in the tech landscape. I don't think that position is going to change over the next five years. That's because Apple's powerful ecosystem keeps customers locked in. The combination of hardware, software, and services is extremely difficult for rivals to compete with.
One thing that investors should accept is that Apple's growth going forward probably won't resemble the past. Apple's revenue declined 2.8% in fiscal 2023 before rising by just 2% in fiscal 2024. The consensus view is that the top line will increase by 4.2% this fiscal year. It's difficult to move the needle on such a gargantuan sales base.
Returning lots of capital to shareholders
Apple's profitability is unbelievably impressive. The company sells its products and services at high margins. And this has a huge impact on the bottom line. Apple raked in $24.8 billion in net income during the latest fiscal quarter (Q2 2025 ended March 29).
Management has not shied away from returning lots of capital to shareholders. In fiscal 2024, Apple spent $94.9 billion on stock buybacks. It also paid $15.2 billion in dividends. That extends a long-running streak of rewarding its investors with a favorable capital allocation policy. There is minimal risk of Apple not being able to keep this going over the next five years.
NASDAQ: AAPL
Key Data Points
Understanding the valuation's impact
My long-held view in the past was that Apple shares were overvalued. This perspective was strengthened by slowing revenue growth. There are other lingering challenges to think about, like the dynamic tariff situation with important supplier countries, falling behind in AI innovation, and regulatory concerns. These factors add uncertainty to the mix.
Investors might think that it's time for a fresh look at the situation. After all, as mentioned, Apple shares are trading 19% below their peak, a high-water mark established in December 2024. The stock has performed very poorly this year, down 17% (as of July 9). Investors are definitely not used to seeing this from a successful business.
However, I still don't believe Apple shares have what it takes to outperform the S&P 500 over the next five years. The valuation is still steep. The stock can be purchased at a price-to-earnings ratio of 32.4. That's above the five-year average. This would be acceptable if growth were better, but this isn't the case.
According to Wall Street consensus analyst estimates, Apple's earnings per share will grow at a compound annual rate of 8.7% between fiscal 2024 and fiscal 2027. That's nothing to get excited about. And without meaningful multiple expansion, which isn't a sure thing at all, the stock could trail the market between now and 2030.
