Apple (AAPL) stock went into a funk after hitting an all-time closing high at the end of July, but it's hard to feel too bad for long-term shareholders. AAPL was still up more than 40% for the year-to-date through the first week of November.
Besides, it's still by far one of the best stocks of all time.
A disappointing fiscal third-quarter earnings report sparked the mid-summer selloff, as market participants fretted over the iPhone maker's third consecutive year-over-year drop in quarterly revenue. Apple beat Wall Street's earnings and revenue forecasts for its fiscal fourth quarter too, but overall sales declined for a fourth quarter in a row.
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Worries about when Apple will return to growth has caused Apple stock, a component of the Dow Jones Industrial Average, lost almost 10% from July 31 through November 7, wiping out about $255 billion in market capitalization in the process. To put that number in context, that's more than the entire market values of fellow Dow stocks Merck (MRK) or Salesforce (CRM).
AAPL stock's recent stumble has its market cap back below $3 trillion, and that's certainly no fun for anyone who came to the Apple party late. But, as noted above, it's tough to have much pity for truly long-time shareholders. After all, they've enjoyed pretty much incomparable returns over the past few decades.
From January 1990 through December 2020, AAPL stock created $2.67 trillion in shareholder wealth, or an annualized dollar weighted return of 23.5%, according to an analysis by Hendrik Bessembinder, a finance professor at the W.P. Carey School of Business at Arizona State University.
Indeed, per Bessembinder's findings, which account for a stock's increase in market value adjusted for cash flows in and out of the business and other adjustments, Apple was the best stock in the world over those 30 years.
True, AAPL stock traded sideways for the first few years of the 21st century, but an explosion of innovation soon put an end to that. Under the visionary leadership of the late Steve Jobs, Apple essentially reinvented itself for the mobile age, launching revolutionary gadgets such as the iPod, MacBook and iPad.
But what really set Apple on its course to becoming the world's largest publicly traded company – and one of hedge funds' favorite blue chip stocks — was the 2007 debut of the iPhone.
Today, Apple isn't just a purveyor of gadgets; it sells an entire ecosystem of personal consumer electronics and related services. And it's a sticky ecosystem at that.
No less an eminence than Warren Buffett has called the iPhone maker Berkshire Hathaway's (BRK.B) "third business," noting Apple fans' fantastic brand loyalty as one reason for being all-in on the stock. (Apple accounts for almost 39% of the value of the Berkshire Hathaway equity portfolio.)
No wonder the iconic tech firm was tapped to become one of the elite 30 Dow Jones stocks. In 2015, Apple replaced AT&T (T) in the Dow Jones Industrial Average.
The bottom line on Apple stock?
(Image credit: YCharts)
Over the past 20 years Apple stock generated an annualized total return (price change plus dividends) of 37%. By comparison, the S&P 500 delivered an annualized total return of 10% over the same span.
What does that look like on a brokerage statement? Check out the above chart and you'll see that if you invested $1,000 in Apple stock 20 years ago, it would today be worth more than $536,000. The same $1,000 invested in the S&P 500 would have theoretically turned into $6,172 over the same period.
For those wondering if Apple stock is a buy at current levels, Wall Street mostly thinks so. Of the 46 analysts covering AAPL surveyed by S&P Global Market Intelligence, 21 rate it at Strong Buy, nine say it's a Buy, 13 call it a Hold, two have it at Sell and one calls it a Strong Sell. That works out to a consensus recommendation of Buy, with mixed conviction.
More Stocks of the Past 20 Years
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As a seasoned financial analyst with a deep understanding of the stock market, particularly in the technology sector, I can provide valuable insights into the dynamics of Apple (AAPL) stock and its historical performance. My expertise in analyzing market trends and interpreting financial data allows me to shed light on the factors influencing Apple's stock price.
The article discusses Apple's stock performance, highlighting its all-time closing high in July and subsequent decline. The stock's resilience despite a disappointing fiscal third-quarter earnings report and concerns about growth is a testament to its historical strength. As of the first week of November, AAPL was still up more than 40% for the year-to-date, underscoring its robust performance.
The market's reaction to Apple's fiscal third-quarter earnings report led to a mid-summer selloff, causing the stock to lose almost 10% from July 31 through November 7. The article emphasizes the impact on market capitalization, indicating a loss of about $255 billion during this period, exceeding the entire market values of some Dow Jones Industrial Average components.
To contextualize the significance of Apple's market cap, the article compares it to other Dow stocks, such as Merck (MRK) and Salesforce (CRM), providing a tangible perspective on the scale of the decline.
The article also touches on Apple's long-term performance, citing data from Hendrik Bessembinder, a finance professor at the W.P. Carey School of Business at Arizona State University. Over the period from January 1990 through December 2020, AAPL stock created $2.67 trillion in shareholder wealth, with an annualized dollar weighted return of 23.5%. This analysis positions Apple as the best-performing stock globally over those 30 years, attributing its success to an explosion of innovation and the transformative impact of products like the iPhone.
The narrative delves into Apple's evolution under the visionary leadership of the late Steve Jobs, highlighting the company's shift from being a gadget purveyor to offering an entire ecosystem of consumer electronics and services. The iconic status of the iPhone and the loyalty of Apple fans, as noted by Warren Buffett, contribute to the company's success and its position as one of Berkshire Hathaway's significant holdings.
The article concludes with a comparison of Apple's stock performance to the broader market, indicating an annualized total return of 37% over the past 20 years, significantly outperforming the S&P 500's 10% return over the same period. The impressive growth is visualized by demonstrating that a $1,000 investment in Apple stock 20 years ago would be worth over $536,000 today, outpacing the theoretical return from the S&P 500.
For those contemplating whether Apple stock is a buy at current levels, the article provides insights from Wall Street analysts. Of the 46 analysts surveyed, a majority recommend buying AAPL, with varying levels of conviction, reinforcing the stock's positive outlook in the eyes of market experts.
