Could Buying Apple Stock Today Set You Up for Life?

Apple (NASDAQ: AAPL) has grown to become one of the world's largest companies over the past several decades, changing the lives of countless investors in the process. Even a measly $1,000 invested in 2005 -- 25 years after the company went public -- would still have grown to over $117,000 today.

Today, Apple's brand is renowned worldwide, and more than 2 billion people use iPhones and other iOS devices. Now, the company is turning to its next chapter. It recently launched Apple Intelligence, its largest push yet into artificial intelligence (AI). Investors hope that AI will take the company and its stock to new heights. So, can buying the stock today set you up for life?

Here are three things you need to know.

1. Apple's success is now working against it

It's no secret that Apple is a behemoth today. The company is worth $3.4 trillion, and its $110 billion share repurchase program, announced earlier this year, is the largest in U.S. history. Its customer base is massive, serving as a wonderful distribution network for selling subscription services and new products.

But at some point, a company grows large enough that its size starts working against it. Apple's $391 billion in trailing-12-month sales are staggering, but they're also up just 3.3% over the past three years. The Apple Intelligence-enabled iPhone 16 will hopefully spark growth, but management guided for just a low-single-digit revenue increase next quarter, which includes the holiday season. So far, it seems unlikely that the company will enjoy the surge of iPhone upgrades Wall Street had hoped for.

Sometimes, you raise the standard so much that it eventually becomes hard to keep it up. Unfortunately, the business in its current form, which still depends heavily on selling iPhones, might be pushing up against its ceiling.

2. The stock's valuation is an issue

Apple is such a universally respected company that the stock may always enjoy a premium valuation compared to most others. However, the market usually doesn't write blank checks. Without sufficient organic growth, it may start to reconsider Apple's valuation.

That could be a troubling situation, given where the stock is today. Shares currently trade at a forward price-to-earnings ratio (P/E) of 31. Meanwhile, analysts have gradually lowered their long-term growth estimates to about 9.5%.

AAPL EPS LT growth estimates, data by YCharts.

That's a price/earnings-to-growth ratio (PEG) of 3.2, which is pretty elevated for even a high-quality company such as Apple. In other words, the stock is pretty expensive for the growth you will likely get in return. It doesn't mean it will crash, but it could eat into future investment returns because it may lag until Apple's earnings grow and catch up to the stock price.

3. Investors may need a new iPhone moment

It seems that Apple has lost steam in recent years. The business is slowing, and its valuation will only continue going higher for so long. A stock's valuation feels heavier the higher it goes. The solution is obvious: The business needs a new "iPhone moment," a game-changing catalyst, much like the original iPhone was in 2007.

Is Apple Intelligence big enough? According to some consumer research, AI features alone don't move the needle enough to motivate iPhone sales.

It might be time for something new, something big. Management has tried some new things. It launched a virtual reality headset, the Apple Vision Pro, but it looks like a flop. The company recently scaled back production due to a lack of demand. It spent years quietly researching autonomous vehicles but reportedly abandoned the project earlier this year.

Can Apple stock set you up for life?

I think writing off Apple would be a silly move; the company has shown that it can win big when it does strike success. Plus, it has virtually bottomless pockets to continue trying new things to find that next big thing. But until the magic happens again, it will be hard for the stock to maintain the stellar returns investors have grown accustomed to. So no, if you're trying to go from rags to riches, Apple stock probably isn't for you anymore.

But that doesn't mean that Apple isn't still an outstanding stock.

You'll be hard-pressed to find a more powerful consumer brand today. Apple's ability to pay dividends and repurchase massive amounts of stock (35% share count reduction over the past decade) should still create solid, perhaps even market-beating long-term returns. You just have to adjust your expectations to Apple's new reality.

Should you invest $1,000 in Apple right now?

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.