Investing in Apple: A Safe Bet or Risky Gamble?
Almost everyone recognizes Apple (NASDAQ: AAPL). Millions use the company’s products daily, contributing to its substantial revenue. In the last fiscal year alone, Apple reported $391 billion in revenue, with net income surpassing $90 billion, accounting for 24% of total revenue.
Image source: Getty Images.
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Apple’s Standing in the Market
It’s no surprise that Apple is one of the largest companies globally. Currently, it holds the title of the biggest company in the world, boasting a market value of $3.68 trillion. This places it ahead of Nvidia ($3.54 trillion), Microsoft ($3.15 trillion), Alphabet ($2.36 trillion), and Amazon ($2.36 trillion).
Reasons to Consider Investing in Apple
While Apple appears attractive to investors, careful consideration is advised. Here are some compelling reasons to invest in its stock:
- Apple is heavily investing in artificial intelligence (AI), expected to enhance its product offerings. With over 2 billion devices in use, some believe Apple could become the top provider of AI to consumers.
- The company pays dividends. Its recent yield was 0.41%, but it has grown at an average annual rate of about 6%. Currently, Apple pays approximately $0.99 per share per year, up from $0.76 in 2019 and $0.51 in 2015.
- Through stock buybacks, Apple’s total yield to shareholders, including dividends, was recently noted as 3% according to Morningstar.
- Apple’s financial health allows it to invest significantly in future growth through research and development and acquisitions.
Challenges to Investing in Apple
On the flip side, potential investors should think carefully about Apple’s valuation. Recent metrics reveal:
Data source: Morningstar as of Jan. 8, 2025.
If you purchase Apple now and hold for a long time, you will likely see returns. However, high valuations can lead to corrections. Buying at lower levels could enhance your gains, so consider your risk tolerance before investing.
Remarkably, Apple’s rich valuation corresponds to impressive performance in recent years:
|
Year |
Apple Gain (or Loss) |
|---|---|
|
2024 |
30.1% |
|
2023 |
48.2% |
|
2022 |
(26.8%) |
|
2021 |
33.8% |
|
2020 |
80.8% |
|
2019 |
86.2% |
|
2018 |
(6.8%) |
|
2017 |
46.1% |
|
2016 |
10.0% |
Data source: 1stock1.com as of Jan. 8, 2025.
Another point to ponder is that Apple hasn’t introduced a groundbreaking product in a significant time frame. While many companies struggle to achieve this, Apple has previously changed the game with iconic products like the iPod, iPad, iPhone, and Apple Watch.
Deciding Your Investment Path
Your decision to buy, sell, or hold Apple shares will largely depend on your perspective. Do you believe that the company will continue to innovate and grow in value? How do you view its current price: fair, a bargain, or overvalued?
It’s worth noting that while impressive gains are possible, they may not consistently reach levels seen in the past, especially after achieving a worth of several trillion dollars.
If you’re interested but uncertain, consider starting with a small investment in Apple. Alternatively, you might want to wait for a more satisfactory entry point.
Personally, I hold Apple shares with plans to keep them long-term, but I’ve reduced my holdings over the last couple of years to diversify my investments and explore other attractive stocks that appear undervalued.
Should You Invest $1,000 in Apple Today?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Selena Maranjian has positions in Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
