Apple Stock: Don't Ignore These 3 Crucial History Lessons

Apple (AAPL) has been a remarkable investment for many years. Warren Buffett's Berkshire Hathaway first invested in Apple in the first quarter of 2016, and since then, shares have risen by an impressive 1,160% as of September 16th.

The company's momentum hasn't slowed down, with its stock price remaining just 2% off its peak. Despite this, investors should be cautious before buying into Apple, as history suggests there are three key things to consider before making a decision.

Firstly, Apple is not always the first to innovate or disrupt in any market category. However, it consistently delivers successful products and services by doing things better than its competitors. The company's seamless integration of hardware and software creates its powerful ecosystem, which supports its competitive position.

For example, although Apple was slow to progress with artificial intelligence (AI), its recent release of Siri AI as part of its Apple Intelligence capabilities shows promise. With 2.5 billion active devices, the company has an unparalleled distribution edge that will undoubtedly support its AI efforts.

Secondly, earnings growth is crucial in the long run for a stock's performance. Throughout its history, Apple has demonstrated remarkable profit growth, with net income increasing by 282% over the last decade. In the first nine months of fiscal 2026, net income climbed 20% year-over-year, driven by strong demand for the iPhone 17 family.

However, it's challenging to imagine this pace continuing indefinitely at such a massive scale. Sell-side analysts predict that earnings per share will rise at a compound annual rate of 13% between fiscal 2025 and fiscal 2028.

Lastly, investors should avoid overpaying for Apple shares. Berkshire Hathaway initially acquired its stake in the company in 2016 when the stock traded at an average price-to-earnings ratio (P/E) of 10.6, which looked like a steal with hindsight. In contrast, the current P/E is 38.1, representing a 259% premium to what Berkshire and Buffett paid.