Let’s find out how much Apple stock has risen every year since the launch of the iPhone in 2007.

17 years have passed since then. apologize (AAPL 1.33%) On January 9, 2007, the company announced the first iPhone, a groundbreaking product that launched the smartphone industry. The stock has been a phenomenal investment since that momentous event. Specifically, over the past 17 years, it has recorded a total return of 7,390%, with an average annual return of 28.7%. This means that your initial investment of $15,000 in January 2007 is now worth $1.1 million.

Is Apple still a smart investment today?

Apple has maintained consistent innovation throughout its history.

Steve Jobs and Steve Wozniak founded Apple in 1976, and the Apple I computer was released that same year. But it was the Apple II in 1977 that established the startup company as an early leader in personal computers. Apple capitalized on this success by entering the public markets in 1980, raising $100 million during its highly anticipated initial public offering (IPO). This momentum propelled Apple into the Fortune 500 list in 1983.

The next chapter was less optimistic. Jobs was effectively fired in 1985, and Apple suffered after his departure. The once-promising computer company fell behind competitors such as: microsoft and IBM, the financial condition gradually worsened. In fact, Apple was on the verge of bankruptcy when the company reappointed Jobs as CEO in 1997. His return sparked a wave of innovation that put Apple back in the spotlight.

Most notably, the company released the first iMac in 1998, the first iPod in 2001, and the first iPhone in 2007. Although this cemented its position as a leading consumer electronics brand, Apple has continued to bring trendy devices to the market ever since. Its current hardware portfolio includes products and services such as MacBook, iPad, AirPods, and Apple Watch.

Shareholders have benefited greatly from the company’s innovative capabilities. The chart below shows Apple stock’s returns each year since the iPhone was launched in 2007, assuming all dividends were reinvested.

Chart by author. Shown above are the total annual returns of Apple stock every year since the iPhone was announced in 2007.

Apple is a leader in consumer electronics, but services are key to its future growth.

Apple has developed significant brand authority due to its innovation capabilities, but it also has a truly sustainable economic moat thanks to its proprietary software. Specifically, the closed-source iOS operating system gives the company complete control over every aspect of the iPhone experience. This also means that third-party manufacturers won’t be able to run iOS on cheaper devices in order to create products similar to Apple’s. Consumers who want the Apple experience have to pay for it, and they do.

Apple gains significant pricing power from its brand authority and proprietary software. For example, the average iPhone costs almost four times more than the average Android phone. The ability to command premium prices is important, but Apple must also grow its services business for the stock to be a worthwhile investment.

Apple has a strong presence in various consumer electronics sectors. It ranks 2nd in the smartphone category, 4th in the personal computer category, 1st in the digital tablet category, and 1st in the smartwatch category. In total, Apple’s installed base exceeds 2 billion devices. But consumers don’t buy hardware as often, so companies need to monetize users through adjacent items like App Store downloads, iCloud storage, Apple Pay, Apple Music, and subscription products like Apple TV+.

Apple has a significant presence in several of these service categories. Most notably, it dominates the mobile application market and monetizes its leadership in two ways: transaction fees and advertising. Apple App Store sales doubled alphabet’s Google Play Store and Apple is one of the fastest-growing advertising companies in the world.

Meanwhile, Apple has established itself as “the most powerful technology company in payments,” according to MoffettNathanson analyst Lisa Ellis. Apple Pay is the most popular in-store mobile wallet among U.S. consumers, with nearly three times the market share of its closest competitor.

Apple stock trades at an expensive valuation relative to its growth prospects.

Apple reported disappointing financial results for fiscal 2023. Total revenue fell 3% to $383.3 billion as high inflation curbed consumer spending. Sales decreased in all business sectors except services. However, the company repurchased enough stock to offset the top-line weakness. Generally accepted accounting principles (GAAP) net income was essentially flat at $6.13 per diluted share.

The chart below details revenue (and revenue growth) for all five business segments for fiscal 2023, which ended September 30, 2023.

Chart by author. Shown above are revenues for all five Apple business segments for fiscal 2023, which ended September 30, 2023.

Wall Street expects Apple to grow its earnings per share by 8.6% annually over the next five years. These consensus estimates make the current valuation of 31.3 times earnings look quite expensive, especially when the five-year average is 26.5 times earnings.

Apple is a great company, but at its current valuation, it’s questionable whether the stock can deliver market-beating returns. That’s why I personally would wait for a cheaper entry point before buying Apple stock. But famous investor Warren Buffett might disagree.