While Apple (NASDAQ:AAPL) stock is still trading below $100 -- down from an all-time high of $134 -- investors should take a close look at the company to see if an investment in the tech giant makes sense for them. Bargains like this don't come around every day.
Here are six simple, objective reasons I believe Apple stock offers great value at this price -- and why it's the stock in my portfolio that I'm the most optimistic about as an investment.
1. Apple stock is on sale. Trading at a price-to-earnings ratio of 10, the market is pricing this market leader as if its revenue has peaked. Comparatively, the average P/E ratio for stocks in the S&P 500 is 21 -- about double that of Apple.
2. The company's dividend is poised for growth. With over $200 billion in cash plus marketable securities on its balance sheet, over $60 billion in annual free cash flow and just $12 billion spent on dividend payouts annually, its dividend is bound to grow. Indeed, it plans to increase its dividend every year -- and I expect Apple to announce a meaningful dividend increase in April.
3. Apple's share repurchases make a difference. When a company spends $110 billion repurchasing shares in just over three years, it moves the needle. Indeed, its repurchase program has driven its share count more than 4% lower during the past four quarters alone.
Going forward, the share repurchase program should continue to add value for shareholders, especially with the stock trading at these levels.
4. Pricing power highlights the power of Apple's brand. The rising average selling price for the iPhone continues to demonstrate the company's pricing power, which in turn shows how willing customers are to pay a premium price for Apple devices. The average selling price for the iPhone in the most recent quarter was $691 -- up from $687 in the year-ago quarter and $637 in the same quarter two years ago.
5. The company is still growing rapidly. Apple's business has soared recently. Trailing-12-month sales and EPS are up 18% and 27%, respectively, compared to the year-ago quarter. Yes, growth in 2016 is uncertain as the company faces the tough comparisons of its big growth last year. But low penetration in China and the growing importance of India may both serve as meaningful catalysts over the long haul. Furthermore, Apple has historically been very successful in introducing new products and creating new growth segments -- and the strength of its ecosystem would provide a huge base of interested customers for any new product categories it introduces in the future.
6. Apple's robust ecosystem keeps customers around. As an Apple customer myself, I know firsthand how its customers can get locked into its increasingly more comprehensive ecosystem of hardware, software, and services. And the company's growing emphasis on services and complementary hardware with products like Apple Music, Apple TV, and Apple Watch only serve to entrench customers deeper.
Apple's growing service segment highlights how increasingly rooted customers are in its ecosystem. Services revenue, which was $6 billion in Apple's most recent quarter, was its fastest-growing segment, up 26% from the year-ago quarter -- easily outpacing iPhone, iPad, and Mac revenue growth.
Ultimately, with every Apple device or app bought, customers are probably less likely to switch to a competing platform.
Trading 27% below all-time highs and with its P/E ratio at a 50% discount compared to that of average stocks in the S&P 500, Apple stock currently provides investors a low-risk entry point.