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$1 trillion.

Apple is likely to be the first public company to achieve that valuation milestone.

Apple (NASDAQ: AAPL) shares now top $193. That’s a huge 25% move in the last year.

The company’s market cap now stands at $943 billion.

It’s been a remarkable run for the stock. You’ll recall that just two years ago, shares could be bought for less than $100.

apple valuation

So, what’s behind the big move for Apple stock? Why the outsized Apple valuation? Let’s take a look, because it offers an important investment lesson.

Back in 2016, Apple shares were dirt cheap. And here’s what I wrote back then:

“With shares trading at $95, Apple is at its lowest level since October 2014. There is no doubt that Apple shares are cheap. On a P/E basis, Apple stock is trading at just 10 times earnings. On an enterprise value basis, shares are trading at just six times earnings.”

Between fiscal year 2015 and 2017, Apple’s revenues actually declined by 2%. Meanwhile, net income dropped by over 9% (EPS are up, due to an aggressive share buyback program that reduced the number of shares outstanding).

How’s it possible that the stock has doubled – even when the financials are unchanged?

The answer is that Apple stock experiences MULTIPLE EXPANSION.

It’s easy to see this by looking at Apple’s P/E multiple.

Back in 2016, Apple shares were trading at 10 times earnings. That was a deep discount to the overall market – measured by the S&P 500.

Lots of people thought Apple was dead. It was a slow growth hardware company. Its only great product was the iPhone. And new products such as the long-anticipated iWatch were disappointments.

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Meanwhile, Samsung was introducing new phones with bigger screens and lower prices. And those phones looked attractive, until they started blowing up and lighting people on fire.

At the time, Apple stock was cheap. And the news flow was negative.

Fast forward to today, and everything has changed.

People love Apple.

The company is finally – and correctly – being recognized as a “platform.” People don’t just buy an iPhone. They also buy an iPad, a MacBook and use iTunes for music and movies. Once a customer gets into the Apple ecosystem, they stay.

In some ways, Apple is like having a subscription. Every two years I get a new iPhone. Every three years, I get a new MacBook. Plus, I pay subscription fees for iCloud and download movies from iTunes every month.

Here’s the most important thing:

Even if another company offered slightly better hardware – or a more competitive price – I’d probably stay with Apple. That’s because the time and  inconvenience of switching is so high.

Now, I recognized this back in 2016. And that’s why I stuck with Apple even when the stock was going nowhere.

Today, the market perception of Apple has changed. And that’s resulted in a “re-valuation” of the company.

Shares of the stock now trade at nearly 17 times earnings.

That’s right – investors today are willing to pay 70% more – per share of Apple.

Investing for earnings growth can be very profitable. There’s also lots of money to make in undervalued stocks – like Apple.

Buying quality companies when they’re temporarily “on sale” can deliver big profits.

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Published by Wyatt Investment Research at