128 Billion Reasons to Buy Apple Inc. Stock

By Markets Fool.com

Source: Apple.

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Apple is clearly one of top brands in the business world. In fact, Brand Finance recently listed the iDevice maker as the most valuable brand in the planet, with an estimated 2015 value of $128 billion. While it's hard to calculate the value of a brand with much precision, there is little dispute that brand power is a crucial differentiating factor for Apple, and also a major return driver for the company's shareholders.

The most valuable brand in the world
There is no way to tell exactly and objectively how much a brand is worth, but different sources do offer similar assessment when it comes to Apple and some peers.

Behind Apple, Brand Finance listedGoogle as the No. 2 worldwide brand, with a value of $77 billion, and Microsoft in third place, with $67 billion in brand value.

Interbrand's 2014 ranking put Apple's brand in the first position, too, with an estimated value of $119 billion, Google came in second place with a calculated brand value of $107 billion, while Microsoft was rated as the fifth-most-valuable brand in the world, with a valuation of $61 billion.

Similarly, the Forbes brand ranking for 2015 put Apple at No. 1 with a calculated value of $145 billion. Microsoft landed in second place, with a value of $69 billion, while Google came in third position with a brand valued at $66 billion.

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Different valuation methods and assumptions can lead to varying results; however, these three assessments agree Apple is the most valuable brand in the planet, with an estimated value ranging from $119 billion to $145 billion.

What brand value means for investors in Apple stock
Investing in companies with powerful brands can be one of the simplest and most effective strategies to achieve superior returns over time. Brands create product differentiation and pricing power, which enables companies to deliver above-average profitability and market-beating returns for investors over the years.

Apple is capitalizing on the power of its brand to produce explosive sales growth and sky-high profitability with its iPhone 6 and iPhone 6 Plus models. iPhone revenue grew by an impressive 55% year over year during the last quarter, reaching $51 billion. This was the main driver behind a 27% increase in Apple's global sales during the period.

Smartphone prices are collapsing across the world. According to data from the Consumer Electronics Association, the average smartphone price has declined from $440 in 2010 to $275 in 2015. However, Apple realized a $62 increase in the average selling price for the iPhone segment during the last quarter, to $659 per unit.

It takes a special brand to achieve both booming sales and rising prices when most industry players are aggressively cutting prices to sustain sales volume. Needless to say, this has major positive implications for profitability: According to Strategy Analytics, Apple retained a massive 89% of all smartphone industry operating profit during the fourth quarter of 2014.

Even more impressive, Apple is increasingly taking market share from the competition. According to CEO Tim Cook, "We're seeing a higher rate of switchers than we've experienced in previous iPhone cycles." The analysts at Canaccord Genuity confirmed this statement in a recent research report: "Our surveys indicate a greater mix of Android smartphone consumers are switching to the iPhone 6 smartphones than in the iPhone 5 series launches."

Apple should theoretically be in a tough position when competing in emerging markets, where income levels are lower and smartphone prices are not subsidized by carriers to the same degree as in the U.S. However, sales are booming in those regions.

Apple's total revenue in emerging markets was up 58% year over year in the last quarter, driven by a 63% spike in iPhone sales. Looking only at the high-growth BRIC countries within the emerging markets category, total revenue rose 64% year over year.

According to multiple assessments, Apple is the most valuable brand in the world, and this is a big positive for the company's competitive strength, growth, and profitability. Brand power matters to consumers, so it should matter to investors, too.

The article 128 Billion Reasons to Buy Apple Inc. Stock originally appeared on Fool.com.

Andrs Cardenal owns shares of Apple, Google (A shares), and Google (C shares). The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.