Apple‘s (NASDAQ: AAPL) past is defined by its winning performance. Shares have skyrocketed a jaw-dropping 953%, including dividends, in the last decade (as of March 17). This is impressive given the scale of the business. Investors are now targeting the next milestone.
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Between fiscal 2022 and fiscal 2025 (ended Sept. 27, 2025), Apple’s diluted earnings per share (EPS) rose at a compound annual rate of 6.9%. Over the next three fiscal years, the consensus view among sell-side analysts is that this figure will expand at a yearly clip of 11.4%. This is a very upbeat outlook compared to recent history.
But there’s a chance that forecast doesn’t play out, as a company of this magnitude naturally starts to see slower growth. And I still believe Apple’s diluted EPS must increase at a faster clip than the 11.4% estimate for the stock to have a chance at hitting $500 in five years.
The latest financial results are promising, though. During the first quarter of fiscal 2026 (ended Dec. 27, 2025), Apple’s revenue jumped 15.7% year over year, driven by a robust 23.4% gain for the iPhone. This drove diluted EPS 18.3% higher.
Apple can certainly have single quarters of strong growth that coincide with innovation cycles. For what it’s worth, it just announced a fresh lineup of new products that can drive consumer excitement and upgrade activity in the near term.
However, I don’t believe the latest outsize gains represent a new normal of what investors should expect. On an annualized basis in Q1, Apple’s revenue base totaled a whopping $575 billion. It becomes more difficult to move the needle at that size.
Apple shares are taking a breather. They trade 11% below their record from December last year. The valuation is still not indicative of a bargain opportunity. The price-to-earnings (P/E) ratio sits at 32.2.
If investors want the stock price to reach $500 by 2031, that multiple probably needs to expand. Improving market sentiment, as demonstrated by a higher valuation, can be a powerful force for investment returns.
I wouldn’t bet on this happening, though. If Apple’s growth decelerates in the future, it probably justifies a lower P/E ratio. Perhaps the stock deserves to ultimately trade at a multiple between 25 and 30. This adds downside risk to the investment thesis.
