Is Apple a growth stock or income stock? What can investors expect from the company in the future? While Apple is considered a growth stock, it also presents opportunities for value investors. Read on to learn more about the rich company history of Apple and what we might expect in terms of future stock price changes.
What is a growth stock?
Is Apple a growth or value stock? Before determining Apple's classification, it's important to differentiate between these two types of sometimes-overlapping investments. A growth stock is issued by an underlying company that shows the potential for above-average growth soon. This growth might be in areas like revenue or earnings growth or physical growth like expansion into new markets.
Growth companies accomplish these goals by reinvesting profits into company operations rather than returning a portion of income to investors through dividends. This means that growth stocks provide less of an immediate return to investors. However, investors see higher returns through share price increases if the anticipated growth occurs.
What is a value stock?
Investors with a long-term focus may want to focus on finding value stocks over growth stocks. A value stock is an undervalued stock in the current market, trading at a lower price than what it's worth (the intrinsic value of the stock). A company's intrinsic value is based on its assets, earnings, cash flows and other factors and measures its true worth.
Value investors analyze company financials relative to stock price to identify stocks trading at prices lower than their intrinsic value. Most value stocks are blue-chip companies and represent comparatively stable investment options. Value stocks are often less risky than growth stocks, as more mature companies often issue them.
As an investor, it’s important to consider how Apple has managed past periods of decreased sales and growth to determine its future potential as a growth stock. Historically, Apple’s ability to mitigate periods of economic downturn and adjust services and product offerings to changing consumer preferences has historically made Apple a top choice for investors looking to maintain shareholder value that extends beyond the latest holiday shopping season.
The iPhone has been a flagship product driving Apple's revenue growth and positive cash flow. As a result, major iPhone launches and the public’s subsequent reception of each product have historically affected the company's stock price, profit levels and total market capitalization. Following the introduction of the iPhone business, Apple's sales grew year after year as the company prioritized adding and expanding on features consumers cared about most.
In 2010, the iPhone 4 introduced the Retina display and the A4 chip, setting a new standard for smartphone performance and display quality. Subsequent years saw a focus on design innovation with the iPhone 5 in 2012, featuring a taller screen and a lighter build.
The 2015 iPhone 6 and 6 Plus significantly shifted to larger screen sizes, responding to consumer demand for more expansive displays. As you can see in the chart below, share prices consistently and steadily rose over this period, as demand for iPhones and apps remained relatively strong.
The success of the iPhone played a pivotal role in driving revenue growth for the company, making it a key factor for investors. However, occasional fluctuations tied to factors like economic conditions, global demand, and competition. For instance, economic uncertainties in 2015 and 2018 led to temporary setbacks. However, Apple's ability to consistently introduce compelling features and maintain customer loyalty contributed to its overall resilience in the stock market.
The release of the iPhone X in 2017 marked a significant leap in technology and design, incorporating features like Face ID and an edge-to-edge OLED display. This release generated substantial consumer interest and contributed to strong sales, positively impacting Apple's financial performance. This helped contribute to additional growth that was sustained until 2019.
Like most blue-chip stock options, Apple experienced a sharp drop in price in 2020 due to the influence of the COVID-19 pandemic. However, during this time, Apple’s strategic focus on services, such as Apple Music, Apple TV+ and the App Store, became a key revenue driver that caused share prices to see new highs in August of 2023. Additionally, the success of wearables like the Apple Watch and AirPods added new revenue streams, diversifying the company's overall business and appealing to investors seeking a broader product portfolio.
Dividend payments have also played a role in Apple’s share price and price movements. Apple initiated its dividend program in 2012, signaling a shift towards returning value to shareholders. Dividend payments have been attractive to income-focused investors, with the company maintaining a current dividend yield of 0.50% in December of 2023. Share buybacks have also contributed to price growth by reducing outstanding shares and increasing the price of each share every quarter at the end of 2023.
While traditionally considered a growth stock, Apple's dividend payments and buybacks have positioned it as a blend of growth and value. The company's matured product lines and focus on returning cash to shareholders reflect a balance between growth and stability, solidifying Apple's business as a blue-chip investment option in the tech sector.
Overview of Apple
It's only possible to discuss technology in the United States by mentioning Apple Inc. NASDAQ: AAPL. Apple is one of the most well-known tech companies in the world, best known for producing the iPhone series of cellphones, which maintains an estimated 53% share of the domestic smartphone market. Apple is also well-known for its Mac computers, iPad series of tablet devices and streaming services like Apple Music and Apple TV. In May of 2023, Apple had a total market capitalization of more than 2.7 trillion, qualifying it for inclusion in some of the largest tech ETFs on the market.
Steve Jobs and Steve Wozniak famously started Apple in 1976. Initially operating out of Jobs' garage, the company quickly gained a following for its innovative personal computer, the Apple II, launched in 1977.
In the 1980s, Apple released the Macintosh, the first computer to feature a graphical user interface and a mouse. Despite its initial success, the company struggled in the 1990s, losing market share to competitors like Microsoft. However, Apple underwent a major turnaround in the late 1990s when Jobs returned as CEO and oversaw the iMac development, which helped revive the company's fortunes.
Apple growth continued throughout the 1990s and 2000s, becoming a household name best known for its continuous product innovation. Releases like the iPod and Apple Watch kept the company in favor of tech enthusiasts and those who prefer a more streamlined user experience. Today, Apple is one of the most valuable companies in the world, operating in 175 unique countries and designated residential regions.
Earnings
Apple's most recent earnings report may indicate a more conservative approach to growth moving forward. While the company reported a revenue of $94.8 billion (down about 3% year after year), Apple CEO Tim Cook emphasized that continued expansion of service infrastructure meant investors could expect more growth in the future. Sustainability and responsible growth were also hot topics.
"We are pleased to report a record in services and a March quarter record for iPhone despite the challenging macroeconomic environment and to have our installed base of active devices reach an all-time high," said Cook. "We continue to invest for the long term and lead with our values, including making major progress toward building carbon-neutral products and supply chains by 2030."
Products
Known for its innovation, Apple's continuous product releases and improvements contribute directly to its growth and stock value. While considering what Apple stock in 10 years will be worth is essential, investors should always keep their eyes on new releases when determining currently undervalued stocks.
Apple's 2023 product lineup includes the iPhone 15 and 15 Pro, the first two iPhone models to introduce USB-C instead of lightning charging features. The Apple Watch Series 9 is anticipated to be released in September of 2023 and may feature enhanced use of biometric data to provide personalized health data points.
Opportunities for growth
As a major component of every tech index, Apple has several opportunities for growth across various areas. Geographically, Apple has been increasingly expanding its retail presence in countries like China and Idea, which present opportunities to access new customer bases.
Apple has also been investing heavily in augmented reality (AR) technologies and has already released AR-enabled apps for the iPhone and iPad. As AR continues to become more mainstream, Apple has an opportunity to develop new products and services that leverage this technology.
Apple has been making inroads in the growing healthcare industry with products like the Apple Watch, which can monitor heart rate and other health metrics. As healthcare becomes increasingly digitized and personalized, Apple has an opportunity to expand its offerings and develop new healthcare-focused products and services. Investors may see the potential for a personalized intersection of health improvement and tech in the Apple Watch, which can track sleep patterns and enable reminders to take medications.
Stock price and technical analysis
Technical analysis is a type of stock analysis that determines short-term price movements by examining shifting prices and purchase data. Analyst ratings of Apple have remained consistently positive, awarding the company an average rating of a "moderate buy." While the stock's predicted upside has dropped in the last three years, this indicates that Apple stock has risen in price alongside analyst predictions.
Monitoring analyst ratings and price targets can help newer investors predict how stock prices will likely move.
Future growth prospects
Analysts project continued future growth for Apple stock, especially if the company continues its historic trend of responding to customer concerns and integrating the latest technology. Some projected releases investors and shareholders are anticipating for 2024 include the following:
- OLED technology: OLED is a type of screen technology that uses organic compounds to emit light, allowing for individually lit pixels, infinite contrast ratios and superior color reproduction in electronic devices.2 redesigned iPad Pro models are in the works for 2024, each including an OLED screen display. Many investors are excited about the upcoming launch, which is set to put Apple on track to have some of the highest-grade displays in the tablet industry.
- IPad Air: Another upcoming model set to release in early 2024 is the iPad Air, which should offer a more affordable alternative to the iPad Pro. These new Air tablets will cut some of the more advanced features of future iPad models. iPad and iPhone model releases with new technology have historically positively affected Apple stock, which can excite shareholders for 2024.
- iOS 18: The iOS 18 release, set to occur at Apple’s annual Worldwide Developers Conference in June, is rumored to integrate AI with real-world use cases heavily. Language models like ChapGPT will be a prominent feature, with shareholders speculating that AI language processing will integrate with virtual assistant Siri.
Apple has also shifted its focus to move into expanding international markets and service sector growth. For example, Apple shifted a larger portion of its manufacturing operations to India, which is anticipated to have positive long-term effects on stock price by reducing the trade tariffs associated with its Chinese productions. Beyond 2024, investor speculation on Apple's health services is also positive, with rumors that the new Apple Watch launch set for 2025 will feature enhanced health monitoring capabilities.
Understanding growth stocks
Before defining Apple as a growth or value stock, it's important to understand the difference between the two types of assets and how the companies that issue them usually operate. Overall, you can think of growth stocks as expansion-oriented and value stocks as oriented toward providing more immediate benefits to investors.
Growth stocks operate on a foundation of aggressive expansion and continuous innovation, driving their performance in terms of earnings and market expectations. These companies prioritize reinvesting their earnings to fuel growth initiatives rather than distributing profits as dividends. The emphasis on revenue growth is fundamental, focusing on capturing an expanding market share and staying ahead of industry trends. As a result, revenue streams tend to experience rapid expansion, often outpacing broader market averages.
Apple is often considered to be a quintessential example of a growth stock thanks to its focus on innovation and changing consumer preferences. Annual product releases have become an event among investors and customers alike, with customer satisfaction with new product offerings directly affecting analyst price targets and ratings — which then has a cascading effect on stock price. This anticipation and potential for either excitement or disappointment showcases Apple’s commitment to reinvesting its profits into product offerings to meet changing customer expectations.
Decoding value stocks
When comparing the multiple types of stock and companies you can invest in, growth stocks are often contrasted with value stocks. Value stocks represent shares in companies typically perceived as undervalued or trading at a price lower than their intrinsic worth. Investors in value stocks are drawn to these companies because they showcase technical or fundamental indicators that often lead to a subsequent increase in share price — like low price-to-earnings or price-to-book ratios.
Value stocks are traditionally associated with companies operating in mature industries, where growth rates have slowed, and the focus shifts towards maintaining profitability and returning value to shareholders. Such companies may have strong fundamentals, including consistent cash flow, lower debt levels and a history of weathering economic downturns. The appeal of value stocks lies in the potential for long-term gains as the market recognizes and adjusts to the intrinsic value of these stable, mature companies.
While Apple is usually classified as a growth stock, its commitment to returning value to shareholders through share buyback programs and dividends adds a value-oriented dimension to this blue-chip company. For example, Apple began offering dividends relatively earlier in its company history, with a consistent payment schedule dating back to 2012. This signals that, while Apple commits a significant portion of its revenue back into product development, its also committed to helping shareholders get in on the growth.
Moreover, Apple's mature status as a global technology giant with a substantial market capitalization positions it as a stable and established company. With a total market capitalization of almost $3 trillion in December of 2023, Apple’s massive influence and position in the tech market is undeniable. While it continues to innovate and introduce new products, its focus on services, the App Store and other recurring revenue models contributes to a more diversified revenue stream, resembling the characteristics of a value stock.
Latest Apple stock news
The most recent product rumor that may influence Apple's stock price is its new mixed-reality headset. The headset, which should release in late 2023, is anticipated to feature two 8K displays with a higher refresh rate, a powerful processor, and a fan to prevent overheating. It may also include a passthrough camera, allowing users to see the real world without removing the headset. This feature can be a useful safety function for use in small spaces or by children.
How to categorize Apple stock
When classifying Apple, most analysts consider the company's investment pattern to be consistent with growth companies. Apple is primarily known as a growth stock because it devoted most of its free revenue to research and the development of new products — a major feature of growth-oriented companies. Apple also showcases a lower dividend yield than income stocks, though many growth stocks offer no dividends.
As we’ve already reviewed, Apple demonstrates characteristics of both a growth and a value stock depending on financial data points like profit margins, analyst price targets and consumer spending. Growth characteristics like reinvesting profits into operations and developing new products keep Apple competitive with rivals. At the same time, strategic events like share buyback programs and dividend payments reward investors. When combined with Apple’s situation as a global tech giant with a major market capitalization, these events give it elements of a value stock as well.
Apple’s dynamic nature and stewardship usually classify it as a hybrid stock among investors. A hybrid stock combines features of both growth and value stocks, allowing investors to potentially benefit from both capital appreciation and income generation. Apple's hybrid nature stems from its ability to balance growth-oriented strategies with shareholder-friendly practices.
Simultaneously, Apple's commitment to returning value to shareholders through share buyback programs and dividends adds a layer of stability and income, reminiscent of a value stock. These shareholder-friendly actions buffer market downturns and appeal to investors looking for more predictable returns. The combination of growth and value elements in Apple's operations creates a diversified appeal, catering to a broad range of investors with different risk tolerances and investment objectives.
Hybrid stocks like Apple can be dynamic features for your portfolio, but it’s important to consider the risks of investing in individual companies. Diversifying your holdings between multiple hybrid stocks can improve overall portfolio performance. Look for companies that balance growth potential and income generation and evaluate their historical performance in revenue and earnings growth. You may also want to focus on dividend history if you're an income investor focused on short-term appreciations in price.
Risks and challenges of investing in Apple
As a long-term investor, it's important to consider Apple's unique position in the market and how it may change in the future. Some of the biggest risks of investing in Apple stock include the following hazards:
- High competition: Apple operates in highly competitive markets, facing challenges from traditional rivals and emerging competitors. Rapid technological advancements can shift consumer preferences, affecting Apple's market share if it cannot keep up with the features consumers expect most from their phones.
- Changes in privacy laws: Regulatory scrutiny, both domestically and internationally, poses a risk to Apple. Changes in antitrust, privacy or taxation regulations could impact its operations and financial performance. For example, stricter regulations requiring explicit user consent for data collection implemented in Europe affected Apple's ad services — a significant portion of its business. Be sure to monitor changing tech and privacy regulations if you do decide to invest in Apple stock.
- Supply chain disruptions: Apple's global supply chain is susceptible to disruptions, as seen with events like the COVID-19 pandemic. Supply chain challenges can impact product availability, leading to potential revenue and profit losses. Supply chain interruptions can influence and harm Apple's ability to innovate — meaning that major disruptions could force the company to shift to more value-based strategies to retain value.
Future Apple outlook
How much was Apple stock in 2000? Apple stock closed at a price lower than 25 cents for much of 2000, less than three decades ago. This tremendous growth has set Apple on a path of success, and today, it is one of the most important companies in the world.
Future outlook for Apple is positive, with exciting projects like re-imagined virtual headsets and iPhone functionality set to release to consumers in 2023 and early 2024. While no company can guarantee future success or growth rates, Apple is on a positive, proven trajectory when considering its company history.
Consider investing in tech for growth
If you're a tech investor looking for growth-oriented opportunities, know that investing in individual companies may increase your risk of losses. Instead, consider a growth-centered tech ETF like the Technology Select Sector SPDR Fund NYSE: XLK.
This ETF, for example, invests about 23% of its assets into Apple but also provides exposure to many other major names in tech. If you're a newer investor looking for exposure to Apple with less risk of capital loss, XLK or another tech ETF can be a stronger choice.
FAQs
Ready to continue learning more about the growth rate of Apple and additional growth-based investments? The following answers some of the top questions you might have when considering the value of Apple stock in five years and beyond.
Is Apple a growth or dividend stock?
Is Apple a growth or income stock? Apple can be considered a growth and dividend stock, depending on your perspective and investment timeline. Apple is a growth stock known for its innovative product development and consistent revenue and earnings growth. However, the company's shares also produce a constant dividend yield of about 0.56% as of 2023.
Is Apple still a growing company?
Yes, Apple is still a growing company. While it's one of the largest tech giants in the world, the company also continuously reinvests back into brand innovation, elevating Apple stock worth and its growth rate Apple brand. For example, 2023 should bring the release of the iPhone 15, a new generation of Mac computers and potentially a high-end VR/AR headset.
What type of stock is Apple considered?
Apple is, first and foremost, a growth stock. The company reinvests large portions of its profits into research and development, fueling new product releases and market investigations. However, depending on your perspective, Apple's stable valuation and consistent revenue growth can also signify that it has the characteristics of a value stock.
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