Could Investing $1,000 in Apple Make You a Millionaire?

Throughout its history, Apple (AAPL 1.30%) has done nothing but compound its investors' capital. In the past two decades, shares have skyrocketed to 20,000%, turning a small $5,000 cash outlay into a cool $1 million today (as of Nov. 22). No one would complain about that kind of monster gain.

But perhaps you're new to the stock market and are wondering what the future might hold with this dominant consumer electronics purveyor. If you invested $1,000 in this "Magnificent Seven" stock right now, could you one day become a millionaire?

An outstanding business

I think every investor who aims to buy and hold stocks for the long haul should at least have Apple on their watch list. That's because this is a high-quality enterprise. I doubt very many people will argue with that statement.

For starters, the company possesses one of the world's strongest brands, a position that took many years to develop and is a direct result of serving up in-demand hardware. Apple is an aspirational brand that resonates so well with consumers, allowing it to charge premium prices for its tech gadgets. This is evident by looking at the gross margin, which was a reported 46.2% in fiscal 2024 (ended Sept. 28).

Apple also benefits from tremendous customer loyalty. The brand plays a key factor in this. Freshly released upgrades to the company's product lineup are usually always met with robust demand, even though the feature updates might not be that revolutionary and the older products still work just fine.

Another reason for the strong loyalty is Apple's powerful ecosystem. The company offers a range of software and services that keep users engaged and discourage them from switching to rival platforms.

The great Warren Buffett, whose Berkshire Hathaway still has a sizable stake in Apple, believes that a person would decline an offer for $10,000 on the condition that they would never be able to buy an iPhone again for life. This points to Apple's stickiness in the eyes of consumers, and it's hard to beat.

Of course, a discussion about the merits of a business wouldn't be complete without considering the financial situation. There aren't many companies at all that are as financially sound as this one is. Apple might actually be in a league of its own.

In the past decade, the company's operating margin has averaged a superb 28.2%. Apple's return on invested capital is currently an outstanding 54.1%. And in fiscal 2024, the business raked in $109 billion in free cash flow, which fuels dividend payouts and significant share buybacks.

The balance sheet is also in pristine condition. Yes, Apple carries term debt, to the tune of $97 billion. But the effective interest rates are between 0.03% and 6.65%, which is manageable.

On the other hand, Apple has $157 billion in cash, cash equivalents, and marketable securities on the books, providing ample cushion and giving shareholders peace of mind.

Don't hold your breath

Apple is such a wonderful company that you might be wondering why you don't own shares. But it's critical to also take into account the valuation. Shares currently trade at a price-to-earnings ratio of 37.9. That's a huge 70% premium to the trailing-10-year average.

What's more, Apple is a more mature enterprise these days. Revenue only grew 2% last fiscal year. And over the next three fiscal years, Wall Street sees the top line expanding at an unexciting 7% annualized clip. When you're working with a gargantuan sales base that's near $400 billion, it's hard to move the needle in a meaningful way.

This makes me believe that a $1,000 investment in Apple, no matter how great the business, likely won't turn you into a millionaire.