January 12, 2025
Almost everyone knows Apple (NASDAQ: AAPL) . Many millions of us have the company's devices in our pockets, handbags, or desktops, and many millions send Apple lots of money every year. Indeed, in Apple's last fiscal year, it raked in $391 billion in revenue. Better still, it kept fully 24% of that, more than $90 billion, as net income.
So it won't surprise you that Apple is among the largest companies in the world . It's actually the biggest company in the world, with a recent market value of $3.68 trillion, ahead of Nvidia ($3.54 trillion), Microsoft ($3.15 trillion), Alphabet ($2.36 trillion), and Amazon ($2.36 trillion).
Despite all that, investing in Apple is not a no-brainer move. It does require a little brain work, because there are both reasons to invest in it and reasons you might not want to.
Here are some solid reasons to consider investing in Apple stock:
Despite all that, there's a good reason to think twice before investing in Apple: its valuation. Consider these recent metrics:
|
Metric |
Recent |
Five-Year Average |
|---|---|---|
|
Price-to-sales ratio (PSR) |
9.5 |
6.9 |
|
Price-to-earnings (P/E) ratio |
39.8 |
28.4 |
|
Forward-looking P/E ratio |
32.4 |
26.8 |
|
Price-to-cash flow ratio |
32.6 |
23.3 |
Data source: Morningstar as of Jan. 8, 2025.
If you buy into Apple now and hold for many years or decades, you'll likely make money -- and potentially a lot of it. Nevertheless, it is not unlikely for an overvalued stock to fall back to a more reasonable level. And if you were to buy at a lower level, all your gains would be greater. Much depends on your risk tolerance.
Meanwhile, those rich valuation numbers are a result of some terrific performances 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 reason to think twice about investing in Apple is that it hasn't introduced a revolutionary new product in a long time. Granted, few companies ever do, but Apple has done so multiple times, with offerings such as the iPod, iPad, iPhone, Apple Watch, and more.
Whether you should buy, sell, or hold Apple depends a lot on you . Do you see the company continuing to introduce great new products in the years to come and having its value grow accordingly? Do you think its current price is reasonable, a bargain, or very overvalued?
I think it's reasonable to expect Apple to not deliver 80% gains in any future years, though it could, of course, happen. Once a company is worth several trillion dollars, it can be harder to grow quickly, though it's still possible.
If you're tempted but unsure, you might buy a small position in Apple, or establish a bigger position over time, buying shares incrementally. Or just add the stock to your watch list and wait and hope for a more attractive entry point.
I am an Apple shareholder personally, and I'm planning to remain one for a long time. I have, however, shed some shares over the past year or two -- in part so that I don't have too many eggs in that one Apple basket, and in part because I see various other stocks as also promising and more undervalued.
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