Shares of Apple (AAPL -1.62%) have taken a hit this year, falling more than 13% as of this writing. This decline is largely related to the overall market's bearish first half of the year. The S&P 500, for instance, is down 18% during this period.
This pullback in the tech company's shares is arguably a great opportunity for investors to consider starting a position in the stock or adding to their stake. And the company's Worldwide Developers Conference this week is also giving shareholders some optimism about Apple's future with plans including new chips and a new Apple Pay Later feature.
Here's why I'm so bullish on Apple shares.
Apple's cash hoard is a powerful asset
Investors following Apple know that the company is a cash-printing machine. It wrapped up its most recent quarter with $193 billion in cash and marketable securities on its balance sheet. When subtracting debt, the company has $73 billion in cash left over.
But this snapshot of the tech company's cash position doesn't come close to capturing how much of a cash cow Apple really is. Consider this: For the trailing 12 months ended March 26, 2022, the company has generated about $102 billion of free cash flow (the cash left over after all operating expenses and capital expenditures are accounted for).
Combining the company's powerful balance sheet with its massive cash flow, Apple has a lot of excess cash to put to work. To this end, the company spends billions repurchasing shares and paying dividends every quarter. It returned almost $27 billion to shareholders through repurchases and dividends in its most recent quarter alone, for instance. In addition, Apple announced in late April that it is boosting its authorization for share repurchases by $90 billion.
Apple's cash, therefore, is creating substantial shareholder value. Dividends give investors cold hard cash, and repurchases reduce the total share count (increasing each shareholder's claim to the business).
Apple CEO Tim Cook. Image source: Apple.
Services: A key catalyst
Another good reason to own Apple stock is the company's thriving services segment. With Apple recording all-time high quarterly services revenue in the fiscal second quarter (its most recently ended quarter), the important segment will likely continue to grow at double-digit rates even if global supply chain challenges slow product sales temporarily.
Apple's fiscal second-quarter services revenue was $19.8 billion, or more than 20% of total revenue. The important segment grew 17% year over year -- nearly twice the rate of the company's consolidated revenue, which increased 9% year over year.
"These impressive results reflect the impact of our continued investment in improving and expanding our services portfolio and the positive momentum that we're seeing on many fronts," chief financial officer Luca Maestri said in the company's fiscal second-quarter earnings call.
Highlighting the company's momentum in services, Apple now has over 825 million subscriptions across its platform. This is an increase of more than 165 million over the last 12 months.
Given Apple's incredible cash position and cash flow, as well as its fast-growing services segment, there's good reason for investors to take a closer look at Apple today to see if the stock's recent sell-off has created an attractive buying opportunity. While there's always a chance that shares can fall further, the valuation is arguably cheap enough to price in most of the near-term supply chain challenges it is facing, making this an opportune time to buy a slice of an outstanding company.
