To The Moon

Apple is an iconic brand that has sold groundbreaking products and services worldwide. You can scarcely find an individual who has not used at least one of Apple's products. Further, Apple customers show a high degree of loyalty to the brand, often staying within the Apple ecosystem for several years or more. A good deal of Apple's sales now come from repeat customers or those who are upgrading to newer versions of the iPhone, iPad, or Mac computers. And product success has led to share price appreciation.

The company's stock has been up over 700% in the last decade alone. That phenomenal success has investors curious if they should buy Apple stock right now. To answer that question, let's dig into the company's prospects and valuation to determine if long-term investors should buy right now.

Image source: Getty Images.

Apple's products and services are used by over one billion people worldwide

Any discussion about Apple's stock cannot ignore the iPhone. The flagship product accounted for over 50% of the company's overall revenue in its most recent quarter ended Dec. 25, 2021. The iPhone will likely continue to have a meaningful impact over several years: In the fourth quarter of 2021, the iPhone commanded a 23.4% share in the global smartphone market, its largest portion since the product's launch. Competitor Samsung is Apple's closest smartphone competitor, holding 19% of the market.

Therein lies another advantage: With one billion people using the iPhone, Apple has ample opportunity to market its services. Net sales of Apple's services grew from $15.7 billion in fourth quarter 2020 to nearly $20 billion in the same period of 2021. Sales of services are more profitable than that of products because Apple need not recreate a service for each new customer. Instead, Apple pays to create a service once, and each new customer that joins brings incremental revenue, delivering a significant contribution profit to the bottom line.

Over the last decade, Apple's products and services have worked together to deliver impressive revenue and profit growth. Revenue has increased from $157 billion in 2012 to $366 billion in 2021. Similarly, operating profit has risen from $55 billion to $109 billion.

What about Apple's stock price?

There is little debate that Apple is an impressive business. Its products and services are coveted by customers worldwide, and it has demonstrated an ability to innovate, create new products, and update existing ones. The next question to ask regards valuation: Is Apple's stock too expensive?

Apple and Microsoft price to earnings and price to free cash flow: Data by Ycharts.

Apple's price-to-earnings and price-to-free-cash-flow ratios are both 29, which falls on the pricier side compared to the company's historical average. However, when viewed next to rival Microsoft, Apple is trading at a discount.

Overall, it's safe to say that Apple's stock is not cheap, but no one can fault an investor willing to pay a premium price for a quality business. For those investors, Apple stock could be a buy right now. For the value-conscious investor, it may be prudent to wait for a pullback in the price before accumulating shares.