Apple Stock: The Ultimate Guide For Investors

Apple stock has been a remarkable success story, driven by innovative products and a strong ecosystem, though it faces challenges in valuation and AI. Here’s what every AAPL investor should know.

• Apple stock has delivered an 18% annual return since 1980, with the company’s success attributed to products like the iPhone, Mac, and services.
• The iPhone remains a key revenue driver, while services offer high margins, contributing significantly to profits despite being only 20% of revenues in 2020.
• Apple faces challenges such as valuation concerns and potential missed opportunities in AI, but continues to innovate and expand its ecosystem.
• The company has a storied history, from its garage beginnings to becoming a tech giant with a market cap exceeding $2.6 trillion as of April 2024.
• Recent earnings seasons show mixed results, with strengths in services and the iPhone, but challenges in Mac and iPad sales and supply chain issues.

Apple stock (AAPL) has been one of the most successful stories in US Corporate history. With shares having returned a whopping 18.4% per year since 1980, it is no wonder that so many investors (and potential investors) are interested in the Cupertino company and its stock.

Today, we take a broad look at Apple: the business segments; the common bull vs. bear cases; the stock’s performance since 1980; the company history; and how the iPhone maker has been doing each quarter over the past several earnings seasons.

Use the index below to better navigate the article:

Apple’s Business Segments

Apple has often been called “the iPhone maker” for a good reason. In fiscal 2023, more than half of the company’s sales came from this product category. Mac and iPad, two immensely popular product categories, added up to no more than 20% of total company revenues combined.

See charts below depicting 2020 revenue split on the left and operating profit split on the right. Notice that, despite accounting for only one-fifth of revenues, the services segment (i.e. App Store, Apple Music, Apple TV+, etc.) produced over one-third of the profits in fiscal 2020. This is the case due to higher and more scalable margins for most services and software.

The two graphs below slice revenue growth in a couple of different views. On the left, notice that the Apple Watch and AirPods helped to make “other products” the fastest growing segment in 2020, at 25% year-over-year. The laggard was the iPhone, due mostly to the delayed launch of the iPhone 12.

On the right, it becomes clear that the developed markets in the West performed better during the pandemic year, growing at least 7% despite the challenges. Greater China suffered most due to (1) the earlier COVID-19 hit and (2) lack of a 5G-ready iPhone in a country where the 5G network infrastructure is ahead of the rest of the world.

Apple Stock’s Bull vs. Bear Cases

At least during the COVID-19 era (and likely for a long time before then), Apple stock has often been considered a great name to own by most Wall Street analysts.

Below, we list a couple of the most common reasons to buy AAPL stock as well as some of the often-cited reasons not to own shares.

AAPL bulls say: the iPhone cycle is strong

• The iPhone represents about half of the company’s revenues – if not more, depending on the period. For this reason, it’s almost impossible to have a bull thesis (or bear one, for that matter) without having a view or opinion on Apple’s smartphone business.
• Before COVID-19, the smartphone industry at large had been showing signs of having entered its maturity or even decline life stage. In 2018, global shipments fell 4% in what research company IDC called “the worst year ever” for the product category.
• But Apple has been bucking the trend. The iPhone has been gaining market share aggressively, especially in markets where it did not already have a strong footprint (think Asia and other emerging markets). Apple controlled only 15% of the smartphone market in 2018, but 24% in Q4 of 2023.
• Reasons cited by the bulls for the recent success of the iPhone include the introduction of 5G capabilities; brand loyalty and status; the power of the Apple ecosystem; and affordability of the lower-end models in emerging markets.

AAPL bulls also say: it’s all about services

• While the iPhone is crucial to sustain Apple’s revenue growth, a smaller segment accounts for a disproportionately large chunk of the company’s profits: the services segment. 
• With high margins and less volatile revenues, I believe that services (at only 20% of revenues in fiscal 2020) could be worth $2 trillion alone. This is due to Apple’s ecosystem organically “feeding” this business, which in many cases takes advantage of the subscription model to capture future revenues in the pipeline.

AAPL bears say: the stock is too expensive

• One of the strongest pushbacks from Apple bears relates to the stock’s rich valuation. In September 2020, AAPL stock traded as richly as 37x next-year P/E (see graph below), although it has been hovering between 20x and 30x since then.
• High valuation multiples is not a big problem if the company can deliver strong earnings growth. However, as of April 2024, Apple was expected to increase EPS by only 9% YOY in fiscal 2025, according to Yahoo Finance, suggesting a still rich PEG of 2.8x.

AAPL bears also say: the company missed the AI bandwagon

• Artificial intelligence has become the buzz phrase in the tech world. While companies like NVIDIA seem to be clear winners in the early AI era, many fear that Apple may have missed the boat.
• Apple takes advantage of AI, as CEO Tim Cook often states, but so far (as of early 2024) mostly to support the company’s existing product and service portfolio – for example, to improve Siri’s capabilities. Investors would likely be happier to see Apple use AI more directly to increment the company’s revenue and profit firepower, maybe through a brand-new product or service category that Apple has yet to launch.

Apple’s History: From a Garage to an iPhone Empire

The Cupertino-based company is an important piece of the personal computing revolution of the 1970s and 1980s. Apple was co-founded by the now famous Steve Jobs and Steve Wozniak to market one product at first: Wozniak’s Apple I PC.

Later in the 1980s and into the 1990s, Apple became known for its Macintosh line of computers – a golden age for the company. But the period also marked the end of the first Steve Jobs era, as the celebrity founder was ousted in 1985.

Apple struggled through most of the 1990s, even flirting with bankruptcy at one point. The stock dropped nearly 80% between March 1992 and December 1997. Steve Jobs returned to the company near the late 1990s bottom to make history again in the tech industry over the following decade and a half.

Between 2001 and 2010, Apple changed the world by introducing devices that became household staples. The popular MP3-playing iPod came out early in the 2000s, while the category-defining iPhone and iPad were launched in 2007 and 2010, respectively.

Fun fact: it was during this period marked by the Intel-based Mac and early innings of the mobile revolution that Apple stock produced its largest three-year gain ever: 1,000% between 2003 and 2006.

Today, Apple is a tech behemoth that sells several products and services ranging from 5G-ready smartphones to smartwatches and even financing through a credit card partnership with Goldman Sachs (GS).

As of April 2024, the consumer discretionary conglomerate was the second most valuable company in the world at a market cap of $2.6 trillion, and the first in the US to have ever been valued above $1 trillion, $2 trillion and finally $3 trillion.

Apple Stock’s Performance

Ever wonder how much you could have made investing in Apple stock at the December 1980 IPO? Wonder no more: 170,000%. This means that a $1,000 investment in Apple in the early 1980s would have grown to over $1.7 million in 2024, for an annualized return of over 18%.

Below is a chart of Apple stock’s price since just prior to the Great Recession, adjusted for stock splits, compared to the S&P 500 (SPY), the Nasdaq (QQQ) and the Dow Jones (DIA) indices. Notice that Apple has lavishly outperformed its broad-market benchmarks in the past decade and a half.

Below are some important facts and figures on Apple stock:

• Annualized return of 18% since the IPO, better than the S&P 500 by about 11 percentage points;
• Annualized volatility of 45%, measured by one standard deviation, which is a solid three times higher than the S&P 500’s volatility (i.e. riskier). However, as Apple matured as a company and stock, the volatility has dropped to a much more manageable 28% since 2010;
• Maximum peak-to-trough drawdown of 82%, a painful pullback that happened not during the thick of the dot-com bubble correction, but in 2003, during the recession that followed. By early 2005, Apple had already reclaimed all-time highs.
• Fun fact #1: although Apple has produced outstanding returns since the IPO, the first 18 months were very rocky. Between December 1980 and early July 1982, Apple stock dipped 62%. Since then, shares have increased 324,000%.
• Fun fact #2: as much as 18% annualized returns since the IPO date may be outstanding, the stock’s best long-term performance happened between the 2003 bottom and today. During this 18-year period, Apple shares produced jaw-dropping annualized gains of 42%! An initial investment of $1,000 in April 2003 would have been worth half a million roughly 20 years later.

1980 to Now: The Journey of Apple’s Market Cap

Currently, Apple stock has the second largest market cap in the US market, with Microsoft leading the pack. The journey as a publicly-traded company was marked by historic product launches and major technological innovations throughout different economic cycles.

Let’s recap this success story that, on and off, has created so much value for shareholders since 1980.

Apple Stock in the 1980s

• The IPO: The year that the Apple III was launched, in 1980, was also the beginning of AAPL’s journey on the stock exchange. At an IPO price of $22 (or ten cents in split-adjusted terms), Apple kicked off with a market capitalization of $1.8 billion. At the time, it was the biggest IPO since Ford, nearly two decades before. Apple debuted in the stock exchange during a year marked by the beginning of a bull market.
• Macintosh era: In 1984 the first Mac was released. At the time, it was considered a “commercial failure but with technical acclaim”, largely due to its high cost. This period was also marked by disagreements among Apple’s top leaders: CEO John Sculley, hired by celebrity founder Steve Jobs at the time, and Mr. Jobs himself.

Apple Stock in the 1990s

• Difficult times: From the beginning of the 1990s to mid-1997, Apple lost competitiveness in the market due to a series of internal factors. Products that lacked consumer appeal led to a sales shortfall, and Apple was allegedly 90 days away from declaring bankruptcy. The company was “saved” at the time by Microsoft, which agreed to pay $150 million to Apple in exchange for a few rights – setting Internet Explorer as the default browser on Macs, for example. Apple’s market cap in 1997 was around only $2.3 billion, barely higher than it had been on the IPO day.
• Prices leveled again: The launch of the all-in-one iMac (the iconic color model), in 1998, was the one of the key milestones of the company’s resurgence. The iMac was well received and helped to boost sales, leading Apple to return to profit once again.
• Jobs is back: Around the same time, in the late 1990s, Steve Jobs returned to Apple – another key development in the company’s turnaround. This was the beginning of what would soon become a revolution in consumer tech (particularly mobile) devices.

Apple Stock in the 2000s

• First, the iPod: In the early 2000s, Apple’s market cap reached $5 billion. This period was marked by the launch of innovative offerings that gave Apple the identity that it still carries today. In 2001, the iPod was unveiled, selling over 100 million units in 6 years. In 2003, the iTunes store saw the light of day, marking the first step taken by Apple in services.
• MacBook and MacBook Pro: 2006 saw the launch of the first model in Apple’s current line of PCs. Apple stock began to appreciate fast: from 2003 to 2006, shares jumped from $6 to $80, adjusted for stock split.
• iPhone, a game changer: In 2007, Apple achieved perhaps the peak in success with mobile devices. Steve Jobs introduced the iPhone and Apple created the concept of the smartphone. To date, it is the tech giant’s most important revenue generator. During the year of the iPhone’s launch, AAPL jumped from $75 billion to $100 billion in market cap.
• Beyond smartphones: A year later, in 2008, Apple launched the AppStore, the company’s biggest revenue generator in services today.
• iPad, the tablet concept: In 2010, when the first iPad was successfully released, Apple passed its peer Microsoft in market cap for the first time. At the time, Apple was worth $269 billion, making it the third largest among public companies in the world by market cap – trailing oil and gas giants PetroChina and Exxon Mobil.

Apple Stock in the 2010s

• King of the world: In 2011, the year Steve Jobs passed away and current CEO Tim Cook took over, Apple became the most valuable company in the world. The market cap reached $337 billion, surpassing Exxon Mobil.
• Wearables opportunity: After successful updates to its entire portfolio, Apple’s growth continued. In 2015, Apple strengthened its wearables segment with the launch of the Apple Watch. In 2016, it was time for the AirPods, adding revenue to this growing segment. Later that year, it was announced that there were 1 billion active Apple devices in the world. At that point, the company was worth $608 billion.
• The first trillion: In August 2018, Apple hit its first trillion dollars in market cap. However, by the beginning of 2019, the equity value had dropped to $746 billion after a broad market pullback in Q4 of 2018, only returning to $1 trillion in October 2019.

Apple Stock in the 2020s

• The second and third trillions: In August 2020, after delivering outstanding results quarter after quarter, Apple crossed another milestone: $2 trillion in market cap. The year also marked the kickoff of the 5G cycle with the launch of the iPhone 12 and the transition of Intel processors to the Apple-designed M1 chip. Fast-forward to July 2023, and Apple stock reached an astonishing $3 trillion in market cap – before pulling back below that milestone level.
• The next step: The main driving force of the company today is Apple’s ecosystem, which ties together its products and services and turns the company into a revenue machine. As we await the next few chapters of Apple’s incredible market cap journey back to the third trillion and possibly beyond, some new candidates for catalysts have emerged: the still ongoing 5G cycle, the Apple-designed M1 chip, developments in mixed reality technology, and possibly an underdog attempt at becoming a big player and leader in generative AI.

Apple: A Recap of All Recent Earnings Seasons

Wall Street Trends now shifts to earnings seasons for a recap of the Cupertino company’s most recent quarterly reports. This will be a living and breathing section that will be refreshed regularly, so check back for updates.

Apple’s Q3 2023: Not Great, Not Terrible

Fiscal Q3 2023 earnings day happened on August 3, 2023.

Analysts did not expect more than flat revenues and EPS this time. And that’s roughly what Apple delivered, once we adjust for an abnormally low effective tax rate.

The services segment showed clear signs of recovery: +8% growth this time vs. +6% in the previous quarter vs. close to zero at the lowest point, in late fiscal 2022. This was the positive development, in my view.

The iPhone, which had seemingly left the supply chain crisis days behind, saw revenues decline YOY by -2%. The rest of Apple’s product portfolio continued to spin its wheels, with further contraction in iPad and Mac sales, and only a slight bump in Wearables segment revenues.

• Best business segment: Services, +8%
• Worst business segment: iPad, -20%
• Best geo segment: Greater China, +8%
• Worst geo segment: Japan, -11%
• Stock price change the day after earnings: -5%
• Stock price change a month after earnings: -1%

Apple’s Q2 2023: Modest Recovery Underway

Fiscal Q2 2023 earnings day happened on May 4, 2023.

Expectations were for a mid-single-digit decline in revenues and EPS. Ahead of earnings, the story centered around the iPhone. The segment suffered from supply chain issues in the holiday season, and the question was: would it recover?

In fact, the iPhone looked better than feared, although YOY growth of +2% was barely exciting. The results could have been better if not for 500 basis points of FX-related headwinds to total company revenues.

If the iPhone was the good, the bad and the ugly were Mac and iPad sales, both down YOY by -31% and -13%, respectively. These two segments would continue to be an eyesore for Apple through fiscal 2023, partly outshining the modest recovery in iPhone and services.

• Best business segment: Services, +5%
• Worst business segment: Mac, -31%
• Best geo segment: Rest of World, +15%
• Worst geo segment: Americas, -8%
• Stock price change the day after earnings: +5%
• Stock price change a month after earnings: +9%

Apple’s Q1 2023: Ugly, But Hopeful

Fiscal Q1 2023 earnings day happened on February 2, 2023.

The quarter was not pretty, although massive FX headwinds and supply chain problems made everything look worse than the underlying business would otherwise suggest.

Tim Cook sounded upbeat about demand for products like the iPhone, including for the higher-end models. If the worst of the supply challenges and FX headwinds are behind us, there is a chance that Apple may thrive in an otherwise challenging 2023.

Despite the ugly numbers, Apple stock was up the next day by +2%.

• Best business segment: iPad, +30%
• Worst business segment: Mac, -29%
• Best geo segment: Rest of World, -3%
• Worst geo segment: Greater China, -7%
• Stock price change the day after earnings: +2%
• Stock price change a month after earnings: +22%

Apple’s Q4 2022: Mixed Results And Volatility

Fiscal Q4 2022 earnings day happened on October 27, 2022.

The quarter was a mixed bag of good and bad news delivered during a period of volatility for the tech sector at large.

Despite some segment revenue misses, the business seemed fine under the surface (think FX challenges and some lingering supply constraints). It took the earnings call to make it clear that the management team remains upbeat about what they see and the upcoming holiday quarter.

Apple stock was up strongly the next day by +8%.

• Best business segment: iPad, +30%
• Worst business segment: Mac, -29%
• Best geo segment: Rest of World, -3%
• Worst geo segment: Greater China, -7%
• Stock price change the day after earnings: +8%
• Stock price change a month after earnings: +9%

Apple’s Q3 2022: Easy Does It

Fiscal Q3 2022 earnings day happened on July 28, 2022.

Apple’s quarter was not a mic dropper, but it was also far from a disaster. Despite headwinds associated with FX movements and the conflict in Ukraine, revenues came in 2% above prior-year levels, beating expectations.

The iPhone was a highlight, delivering above-consensus results that proved the resilience of the 5G upgrade cycle. Another highlight were better-than-expected margins, something that has become a regular occurrence in Cupertino as of late.

Apple stock was up the next day by +3% and +17% a month later.

• Best business segment: iPhone, +3%
• Worst business segment: Mac, -10%
• Stock price change the day after earnings: +3%
• Stock price change a month after earnings: +17%

Apple’s Q2 2022: Mic Dropper

Fiscal Q2 2022 earnings day happened on April 28, 2022.

This was one of Apple’s last truly impressive quarter of the COVID-19 era. Here’s how Wedbush analyst Dan Ives summarized the quarter: “print this earnings report and frame it”.

Three of Apple’s five business segments grew revenues by 12% or more. Margins were strong, more than my aggressive estimates. CEO Tim Cook sounded very upbeat about the results, as he should. He did point out, however, that supply chain issues hurt the iPad segment.

Interestingly, Apple stock was down the next day by -4%.

• Best business segment: Services, +17%
• Worst business segment: iPad, -2%
• Stock price change the day after earnings: -4%
• Stock price change a month after earnings: -11%

Apple’s Q1 2022: Strong Holiday Quarter

Fiscal Q1 2022 earnings day happened on January 27, 2022.

The quarter was excellent, as Apple delivered segment beats and gross margin above the high end of the management team’s own guidance provided three months earlier.

The iPad was hurt by supply chain constraints, but that was the extent of the bad news. All other segments beat consensus on revenues. While some had doubts about the strength of the iPhone 13 cycle, the earnings season

Apple stock rallied the day after earnings, but the share price fizzled in the following few weeks.

• Best business segment: Mac, +25%
• Worst business segment: iPad, -14%
• Stock price change the day after earnings: +7%
• Stock price change a month after earnings: -5%

Apple’s Q4 2021: Strong, But Not Enough

Fiscal Q4 2021 earnings day happened on October 28, 2021.

Apple delivered impressive numbers, but largely missed Wall Street’s expectations with a revenue of $83.4 billion and a profit of $20.7 billion.

iPhone sales grew a whopping 47%, but analysts were expecting an even more impressive 57%. Services, unaffected by supply problems, grew nearly 26% YOY, better than expected.

CEO Tim Cook addressed concerns about supply chain constraints, which turned out to be only the beginning of the issues that would linger for many quarters to come. He emphasized Apple’s efforts to minimize the impact of the ongoing chip shortage.

Apple stock dipped -1.8% the day after earnings, but climbed 5.2% in the month that followed.

• Best business segment: iPhone, +47%
• Worst business segment: Mac, +2%
• Stock price change the day after earnings: -2%
• Stock price change a month after earnings: +5%

Apple’s Q3 2021: Great Numbers, Market Unimpressed

Fiscal Q3 2021 earnings day happened on July 27, 2021.

Apple topped the consensus by a very wide margin: $8 billion on revenues and 29 cents on EPS. However, Apple stock did not react as well as some might have expected.

The iPhone was a highlight in the quarter: $39.6 billion, $5 billion more than consensus. About two-thirds of the revenue beat came from this segment. Services printed excellent sales growth of nearly 33%, and every major geographic region grew by at least 28% and as much as 58%.

The problems (if any), as highlighted by Citi’s Jim Suva, were:

“(1) No guidance for the September quarter and (2) commentary during the conference call that the September quarter will see services growth closer to normal due to above-normal June quarter strength, lingering supply chain issues, and 3 points of revenue headwind from FX.”

Apple stock dipped -1.2% the day after earnings, but flipped to a gain of 1.2% one month later.

• • Best business segment: iPhone, +50%
  • Worst business segment: iPad, +12%
  • Stock price change the day after earnings: -1%
  • Stock price change a month after earnings: +1%

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