Could investing $1,000 in Apple make you a millionaire?

Throughout its history Apple (AAPL 1.30%) has done nothing other than increase the capital of its investors. Over the past two decades, shares have risen to 20,000%, turning a small $5,000 cash investment into a cool $1 million today (as of November 22). Nobody would complain about such a monster win.

But maybe you’re new to the stock market and wondering what the future might hold for this dominant consumer electronics player. If you invested $1,000 in this “Magnificent Seven“Stock right now, could you become a millionaire one day?

An outstanding business

I think any investor who wants that Buy and hold stocks In the long term, Apple should at least be on the watch list. This is because this is a high quality company. I doubt very many people will disagree with that statement.

First of all, the company has one of the strongest brands in the world, a position that has taken many years to develop and is a direct result of providing in-demand hardware. Apple is an emerging brand that is so popular with consumers that it can charge premium prices for its tech devices. This becomes clear when you look at this Gross marginwhich represents a reported 46.2% in fiscal year 2024 (ending September 28).

Apple also benefits from enormous customer loyalty. The brand plays a crucial role here. Newly released upgrades to the company’s product lineup tend to always see strong demand, even though the feature updates may not be as revolutionary and the older products still work just fine.

Another reason for strong loyalty is Apple’s powerful ecosystem. The company offers a range of software and services that retain users and prevent them from switching to competing platforms.

The great Warren Buffett, whose Berkshire Hathaway still owns a significant stake in Apple, believes that a person would reject an offer of $10,000 on the condition that they would never be able to buy an iPhone again for life. This indicates how strong Apple remains in the eyes of consumers, and that’s hard to beat.

Of course, a discussion about the merits of a company wouldn’t be complete without considering its financial situation. There aren’t many companies that are as financially sound as this one. Apple could actually be in a league of its own.

Over the past decade, the company’s operating margin has averaged an excellent 28.2%. Apples Return on invested capital is currently at an excellent 54.1%. And in fiscal 2024, the company generated free cash flow of $109 billion, fueling dividend payouts and large share buybacks.

The balance sheet is also in immaculate condition. Yes, Apple has $97 billion in term debt. However, 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 its books, providing ample cushion and reassuring shareholders.

Don’t hold your breath

Apple is such a wonderful company that you may wonder why you don’t own shares. However, it is important to also consider the valuation. The shares are currently trading at a Price-earnings ratio Ratio of 37.9. That’s a huge 70% premium over the average over the last 10 years.

Additionally, Apple is a more mature company these days. Sales rose just 2% in the last fiscal year. And over the next three fiscal years, Wall Street expects revenue to grow at an unexciting 7% annual rate. When you’re working with a gargantuan revenue base of nearly $400 billion, it’s difficult to move the needle in any meaningful way.

This leads me to believe that a $1,000 investment in Apple, no matter how great the business is, is unlikely to make you a millionaire.