Where will Apple stock be five years from now? Unfortunately, it’s not a question Siri can answer. Unless you’ve got a crystal ball, you’ll have a difficult time accurately predicting the exact path of any company.
Think about the major events that have caused markets to rise or plummet in recent years. If we had known what 2020 had in store when the clock struck midnight on New Year’s Eve, I don’t think anyone would have been celebrating with champagne and fireworks.
That doesn’t mean we have to invest blindly either. As the legal disclaimers on any fund factsheet will tell you, past performance is not a guide to future returns, but it can give you an idea of where a stock is coming from. And Apple is one of the best-performing stocks in the S&P 500 over the past 20 years.
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Likewise, looking at a company’s earnings reports and forecasts can give you a sense of where it is now, and where it might be heading next.
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The broader market context is important too. In Apple’s case, how does it stack up in the AI race and is it seen as a leader or a laggard? These are all important factors in driving a company’s share price.
So let’s take a closer look at the much-loved iPhone giant, regularly one of the most popular tech stocks with DIY investors. How much could you have made by investing five, 10 or even 20 years ago? And should you invest in Apple going forward?
What would $1k of Apple stock invested five, 10 and 20 years ago be worth today?
If you had invested $1,000 in Apple stock five years ago, it would be worth over $4,400 today, according to data from Morningstar Direct. That’s a cumulative return of over 340%, or an annualised return of around 35% – not at all shabby.
Meanwhile, if you had acted 10 years ago, your investment would now be worth more than $10,600. And if you had got in there 20 years ago, when the iPhone was just a twinkle in Steve Jobs’ eye, your original $1,000 would be worth more than $419,000 today.
That’s partly down to Apple’s glittering long-term performance, and partly down to the power of compound returns. For comparison, it’s worth mentioning that the average annual return of the S&P 500 is around 10% per year.
With this in mind, Apple would have been a good addition to a diversified stocks and shares portfolio over these time periods.
What headwinds is the iPhone maker facing?
It hasn’t all been smooth sailing for Apple in 2024, with the share price ticking downward until mid-April before rallying and hitting a record high in June. The company is facing headwinds, including fierce competition in China and falling iPhone sales.
Until recently, another concern was that Apple had been quiet on the AI front. This, coupled with a lack of product innovation in recent years, left some investors wondering whether the original poster child of market disruption had lost its way.
While China and iPhone sales remain an issue, “progress with AI means [Apple] is now seen as a catch-up candidate, hence the rally in the share price,” explains Dan Coatsworth, investment analyst at AJ Bell.
What is the outlook for Apple five years from now?
“The next generation of chips, M4 and A7, are one of the key opportunities for Apple in the next five years,” according to Alex Crooke, manager of the Bankers Investment Trust.
“We believe the introduction of these chips will lead to a shortening of the upgrade cycle across its product range, particularly in bringing new AI capabilities to its handsets with Apple Intelligence,” he told MoneyWeek.
Apple Intelligence is Apple’s foray into the AI space, with the initial release currently scheduled for this Autumn. It is a digital assistant, built into your device to help you “write, express yourself, and get things done effortlessly”, Apple says.
Crooke points out that Apple is able to design the M4 and A7 chips itself, which affords the company “greater processing speeds and reduced costs”. He also sees an opportunity for Apple to grow transactions using Apple pay.
That said, there are still some hurdles for the company to navigate. Affordability is a key one, in Crooke’s view, as Apple’s handsets are more expensive than those offered by competitors. He adds that new launches like the Apple Vision Pro headset were also limited by their hefty price tag.
“Ultimately, [Apple has] a loyal customer base which is not inclined to switch to a competitor for a few new features, but it will be its ability to persuade users to upgrade earlier that will drive performance,” he explains.
He adds that the company may also have to navigate a tighter regulatory environment in the years to come, particularly in Europe, as well as the possibility of higher taxes. These issues are not unique to Apple, but would likely impact all of the ‘Magnificent Seven’ tech stocks.
