Tim Cook succeeded Steve Jobs as Apple's (AAPL -0.25%) CEO on Aug. 24, 2011. Just six weeks later, Jobs passed away from pancreatic cancer. At the time, many investors considered Jobs' death to be the end of an era.
Jobs had returned to Apple on Sept. 16, 1997 -- exactly 12 years after being ousted from the company he co-founded -- and revived its ailing business with the iMac, iPod, iPhone, and iPad. Under Jobs, Apple disrupted the PC, MP3 player, smartphone, and tablet computer markets with its sleekly designed and easy-to-use products.
From fiscal 1997 to fiscal 2011 (which ended in September 2011), Apple's annual revenue increased at a compound annual growth rate (CAGR) of 22% from $7.1 billion to $108.3 billion. From Jobs' first day back to Cook's ascension as its CEO, Apple's stock rallied 6,760%. A modest $2,000 investment would have grown to $137,200.
Image source: Apple.
It was tempting to cash out of Apple after Jobs handed the reins over to Cook, who had mainly been known for scaling up the company's production capabilities instead of developing its hardware products, but that would have been a massive mistake.
Why did Apple continue to thrive under Tim Cook?
Apple's stock has risen 1,150% since Cook's first day as its permanent CEO. It also delivered a total return of 1,380% after reinvesting the dividends which Cook reinstated in 2012. That $2,000 investment in Jobs' first day back at Apple would have continued growing to $2.03 million under Cook's watch after including its reinvested dividends.
Even if you didn't buy Apple's stock during Jobs' tenure, you still could have made a lot of money by betting on Tim Cook's ability to expand the company. If you had simply invested $2,000 in Apple on the day Cook took over and reinvested your dividends, your investment would be worth more than $20,000 today.
From fiscal 2011 to fiscal 2023, Apple's revenue grew at a CAGR of 11% to $383.3 billion. Most of that growth was driven by the iPhone, which still accounted for over half of its revenue in fiscal 2023. It also grew its earnings per share (EPS) at a CAGR of 16% as it bought back more than 40% of its shares.
Under Cook, Apple launched new hardware products like the Apple Watch, AirPods, HomePod, and Vision Pro. But only two (the Apple Watch and AirPods) were considered hit products. The HomePod struggled to gain ground against Amazon in the smart speaker market, and the Vision Pro remains a pricey niche gadget for early adopters. Apple also recently abandoned its plans to build an electric car after pouring billions of dollars into the secretive project for a decade.
That's a mixed track record, but Cook also directed Apple to expand its services business with new subscription-based services like Apple Music, Apple TV+, and Apple Arcade. The ecosystem -- which also houses its App Store and iCloud platform -- now serves over a billion paid subscribers. Apple generated more than a fifth of its revenue from those services in fiscal 2023, and they could lock in more of its users, curb its long-term dependence on the iPhone, and challenge companies like Netflix and Spotify in the growing streaming media market.
Does Apple still have room to run?
Apple might not be pulling rabbits out of its hat as it did every few years under Steve Jobs, but it's still expanding, making plenty of money, and returning a lot of that cash to its investors through buybacks and dividends. It's also still one of the few consumer electronic brands that can also be considered a bona fide luxury brand.
Apple ended its latest quarter with $173 billion in cash and marketable securities, so it still has plenty of ways to expand its ecosystem through big investments and acquisitions. That's probably why Warren Buffett continues to allocate more than 40% of Berkshire Hathaway's entire portfolio to Apple.
Apple's stock has declined more than 10% this year as investors fret over its declining iPhone sales in China, regulatory headwinds for its App Store, the Vision Pro's lackluster launch, and the abrupt end of its electric vehicle dreams.
But over the long term, Apple's business will likely bounce back as it rolls out new hardware products, expands its services ecosystem, and rewards its patient investors with bigger dividends and buybacks. So before you decide to give up on Apple, remember what happened to those investors who hastily sold their shares when Tim Cook took over nearly 13 years ago.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun has positions in Amazon and Apple. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, Netflix, and Spotify Technology. The Motley Fool has a disclosure policy.
