Apple (AAPL) shares are worth buying at these levels — even after nine straight positive sessions including Friday's modest advance. While there are many reasons to like the iPhone maker, we want to focus here on Wall Street's perception of Apple and what investors are willing to pay for its stock. We're talking about Apple's multiple or its price-to-earnings ratio. The P/E ratio on a stock is calculated by dividing the share price by its annual earnings. The earnings part of equation can be 12 months trailing — meaning the latest four reported quarters; or 12 months forward — based on estimates for the next four quarters. The forward P/E is more useful in trying to forecast where the value of a stock based on earnings is going rather than where it's been. We'll get into Apple's forward multiple a bit later in the story. But first, we want to talk about why it's an especially relevant discussion to have following the strong stock move recently and a report from Bloomberg on Thursday saying Apple plans to launch an iPhone subscription plan — comparing the potential service to an auto-leasing program, but for iPhones. The iPhone is already Apple's primary monetization vehicle for its other services, like the App Store and Apple Music, so finding a way to bring phone sales firmly under the recurring revenue umbrella would be an important development. Why it matters If the type of service described by in the report were to happen, here's why it's important for the stock and why it supports our investment thesis here at the Investing Club: Investors generally place a higher multiple on revenues generated through subscriptions because they're more predictable and less susceptible to dramatic, up-and-down swings. An iPhone subscription service would be Apple's latest foray into recurring revenue streams. As Apple has grown its subscription business, investors have been willing to pay up for its stock compared with years prior. Converting at least some of its iPhone sales to a subscription basis would further support Apple's higher multiple since traditionally, investors view hardware purchases as more cyclical. Remember: iPhone sales are, by far, Apple's largest single revenue source, accounting for more than half of the company's sales in fiscal 2021. Cramer's take Jim Cramer has been saying for years that Apple shares deserve to trade less as a technology hardware company and more like a consumer staple. Tech hardware firms have lower multiples because, as noted, their revenues are considered cyclical, while a consumer staple like Procter & Gamble makes products people buy consistently and see their sales grow in the low-to-mid single digits. When you run out of P & G's Crest toothpaste, you go to the store and buy another tube. Take a look at the forward P/E, on a five-year average, for a few companies in both those categories. Cisco Systems , also a Club name, trades at 14.8x. IBM : 10.8x HP Inc .: 9.4x P & G : 22.1x PepsiCo : 22x Colgate-Palmolive : 23.3x Prior to the fall of 2019, Apple's stock generally received a mid-teens forward multiple. For example, in September 2019, Apple traded at 16.5 forward earnings. Since then, its forward P/E has trended higher as investors reconsider what they're willing to pay for the company's future earnings stream. Apple's forward P/E, on a five-year average, now stands at roughly 20. The stock closed Friday around 27.3 times the next 12 month's projected earnings. We believe Apple's higher multiple can be maintained, and our conviction in this belief would grow if an iPhone subscription service gets launched to consumers. In our minds, it would solidify Apple's position as tech's consumer staple. We also think it would help Apple demonstrate its customer lifetime value, something Cramer also has talked about for years . Bottom line Cramer has long preached the same mantra about Apple: Own it, don't trade it. Looking at a five year chart of the stock tells the story. While the stock has recovered some of its losses from earlier this year, we still view Apple favorably long-term as investors embrace its increasingly subscription-based revenue streams. The potential arrival of an iPhone subscription service would only bolster that case. On Monday, we moved Apple to a 1 rating , meaning we would be buyers of the stock at its current levels. For those who have yet to take a position in the iPhone maker, we feel comfortable saying Apple is still a buy here. We see more upside ahead. (Jim Cramer's Charitable Trust is long AAPL and CSCO. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Customers walk past a digital display of the new green color Apple iPhone 13 pro inside the Apple Store on 5th Avenue in Manhattan, in New York, March 18, 2022.