Where Will Apple Stock Be in 3 Years?

Since March 1, 2021, Apple (NASDAQ: AAPL) shares have risen about 50%. More than double the Nasdaq Composite Index gain during the same period. It extends this tech giant's streak of market dominance. As the AI mania continues, Apple shares are still at their all-time high. But investors think long-term.

The iPhone, introduced in 2007, made Apple a global cultural and corporate icon. The popular smartphone still accounted for 52% of the company's 2023 revenue 17 years later. Apple is still an iPhone company. Other goods include iPads, MacBooks, Watches, and AirPods. Hardware made up 78% of fiscal 2023 revenues. That sales figure was down 6% from last year, so it's not a growth engine anymore.

The current macroeconomic climate may restrict discretionary spending due to increasing interest rates and recession fears. Newer gadgets feature fewer game-changing updates, making it easy to postpone buying the latest product.

Apple supporters may have thought the company will produce an autonomous vehicle. This project was scrapped lately. Apple could've made a lot of money in the global car market, but we'll never know. I'm sure the iPhone will remain Apple's mainstay in 2027.

Astute readers will notice that another Apple division is rising in importance. Services and subscriptions include iCloud, Pay, Card, TV+, Fitness+, and Music. In the first quarter of 2024 (ending Dec. 30), this segment sold $23 billion, up 11% year over year. Services are still modest yet have more development potential than hardware. With a 73% gross margin, they are far more profitable.

In a competitive sense, services dominate the Apple ecosystem. Globally, the company has 2.2 billion active devices, growing each quarter. This boosts high-margin, recurring service and subscription revenue. Keeps customers engaged and loyal. I still anticipate devices, especially the iPhone, to carry the weight three years from now. But this emerging demographic shouldn't be overlooked.

To become one of the world's most valuable firms, a company must treat its shareholders well. Apple too. A tremendous winner, the stock has undoubtedly made many billionaires. From a new perspective, shares aren't cheap. Their price-to-earnings ratio is 28.2. A big jump from its 10-year average. This shows Apple investor optimism.

If Apple had a huge growth potential ahead, that valuation might make sense. That's not true. Analysts expect revenue to grow 4% year between 2023 and 2026. Thus, during the following three years, the stock may underperform the Nasdaq Composite Index

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