According to foreign media reports, Apple Inc's share price more than doubled last year, but the rapid growth is not only the result of temporary irrational exuberance. Instead, as many analysts and observers have pointed out,It means that investors have formed a new understanding of Apple Inc, shrugging off the pessimistic view of the past, believing that Apple Inc's valuation is much lower than that of other consumer electronics competitors who have been doing well.

Why is Apple Inc's stock valuation important?

Understanding the changes in Apple Inc's share price is not just the interest of the investment community. For Apple Inc's users, this is a recognition of the company's long-term strategy of producing a series of popular products.This shows that Apple Inc is not only lucky to create iPhone and iPad at the right time, but also able to plan a series of sustainable and strategic products and services that are not only profitable but also popular.

Apple Inc operates around the world as a precision engine that is good at realizing the future. Microsoft Corp, Alphabet Inc-CL C, Samsung Electronics and other Android licensees are completely different. These companies jump back and forth between strategies and pilot plans, but do not stick it out, often giving up on ideas after failing to complete or simply cannot find enough users to support their ideas. From Surface to Windows phones, from Nexus and Pixel phones, tablets and netbooks to Galaxy Edge, curved screen, 3D, manual control, unsafe biometric technology, and so on, the rest of the industry stands in sharp contrast to Apple Inc's decades-long sensation and solid technological milestones.

Apple Inc is also making mistakes, canceling the plan and going backwards in his own direction. But these events are clearly abnormal. In fact, everything the company has done over the past 20 years has grown into a multibillion-dollar company.

Apple Inc's success includes year after year's innovative iPhone, which continue to set and improve smartphone design standards and which features are important globally. They also include new wearable devices from Apple Watch to AirPods, as well as unique features such as Sidecar that are not only novel but also life-saving.

By contrast, Android Wear, Microsoft Band and Samsung Gear did not have any real positive impact on users, becoming another failed commercial product for these companies. These facts are important! Finally, for the first time in a decade, Apple Inc's valuation began to reflect this fairly obvious reality. Why is it taking so long?

Why is Apple Inc's stock price undervalued for a long time?

Apple Inc's historically low valuation in terms of price-to-earnings ratios is clearly directly related to one of the biggest mistakes made by technology investment analysts over the past decade:Apple Inc's iPhone is a fluke, will be commercialized quickly and will be overtaken by the army of cheap, less restricted and more "open" phones running Alphabet Inc-CL C's Android system.

This assumption is based on the history of the Macintosh computer (Macintosh) in the 1990s, and a few years before Microsoft Corp copied its basic concept and spread it to an ordinary computer, erasing most of the value created by Apple Inc, the Macintosh began to perform well on Apple Inc. For many users, Windows computers better meet their needs than Macintosh computers, leading Apple Inc to play a small role in the creative and educational markets.

In fact, every analyst who tracks Apple Inc uses this history to predict that the same thing will happen to Android phones. However, something that should have affected their prospects long ago began to happen. In the early 2000s, even before the launch of the iPhone, Steve Jobs's Apple Inc began to transform the Macintosh from a niche computer into an ideal high-end product that stands out among ordinary Windows computers. More importantly, the company also started selling a large number of new iPod devices, and various competitors tried to replicate them, but without similar success.

In 2007, iPhone was born out of nowhere. Apple Inc combines the satisfying ease of use and attractive industrial design of Mac with the simplicity of iPod to launch the first modern smartphone for mainstream users. However, the industry did not observe these events, nor did it imagine that Apple Inc would develop into a global super company after the first launch of iPhone, but something very different happened.

Why do most analysts misunderstand Apple Inc?

As Asymco analyst Horace Dediu and Beyond Avalon analyst Niel Cybart recently pointed out, Apple Inc's price-to-earnings ratio hovered around 40 times in 2008. But in 2008, Apple Inc's share price halved as other analysts began to predict that Apple Inc's new products would be blinded by the Great Recession. As the "global macroeconomic situation" deteriorates, who will buy high-priced mobile phones?

It turns out that the value of iPhone is much higher than the so-called premium demanded by Apple Inc-a price that most operators are subsidizing. IPhone shipments were growing and never looked back, growing at an alarming rate over the next decade. However, throughout this period, the media and bloggers have been promoting the idea that someday soon, Apple Inc will face fierce competition that he cannot cope with.

The original idea was that Palm could launch a better smartphone with the help of a large number of defected Apple Inc employees. At the time, it was thought that BlackBerry could use its close relationship with companies to stop the rise of Apple Inc. Microsoft Corp is then thought to have the ability to use his Windows platform to invest billions of dollars to provide a better phone experience.

In the end, with the decline of all other trusted competitors, Alphabet Inc-CL C was thought to be able to emulate the Windows model of the 1990s and integrate all failed handset makers into a glorious free and open platform. This illusion lasts the longest, and supporters even today suggest that Apple Inc's iPhone will eventually have a strange function. This illusion lasted for a decade and never became a reality.

The reality is that Apple Inc is on the offensive, moving into areas where other mobile phone makers already have a place. It first touched Samsung's large-screen phones, then enhanced camera capabilities offered by Nokia and Sony Group Corp, creating an ecosystem of business applications once owned by Microsoft Corp and, more recently, the wearable market created by Fitbit and other companies.

Apple Inc proved that it can not only survive, but also absorb the entire business unit, leaving no room for competitors.Over time, the idea that some of Apple Inc's Western competitors would slow its growth was abandoned, shifting the focus first to Samsung Electronics and then to a number of Chinese companies: XIAOMI, OPPO, Lenovo and Huawei. Judging from the number of shipments alone, it is possible to fabricate a story about Apple Inc's lagging behind in smartphone market share.

However, in the first 10 years of the 2000s, global product sales did not have any negative impact on iPod. A large number of cheap MP3 players have not slowed down Apple Inc's growth at all. At that time, Apple Inc's success on iTunes and iPod was more important because of its loyal user base, rather than Apple Inc's relative proportion of all MP3 players in the world.

In 2014, Tim Cook, chief executive of Apple Inc, began to turn more attention to this reality, stressing that shipments alone could not accurately assess Apple Inc's current or future business prospects. A large number of low-end phones have been shipped to India and other emerging markets, but this has not stopped Apple Inc's ability to sell his high-end iPhone to the city's most commercially valuable buyers, no matter how many market research groups may have come up with misleading statistics showing that other companies are "ahead" of smartphones, launching millions of low-quality devices that are not profitable. It doesn't even make a good impression among users.

Pessimists insist that shipments and overall market share are crucial. They made it clear that millions of users are leaving Apple Inc's ecosystem to buy cheaper Huawei equipment. In addition to the mini blog, the story has been trumpeted by the New York Times, Bloomberg, Nikkei News and other major news media.

Analysts also shunned reports that sounded true. These reports say no one is likely to buy Apple Inc's $999 iPhone. Logically, it makes sense that everyone is buying Huawei's mobile phone. It just didn't happen. Some people even fabricate data to support this claim.

Just a few weeks ago, Jun Zhang, an analyst at Rosenblatt Securities, claimed in a research report that sales of iPhone 11 products were in trouble, causing Apple Inc to cut production orders by 30 per cent, all based on the same "channel checks", but proved to be completely wrong data year after year. About a month ago, the New York Times said in an article based on a Rosenblatt report that "Apple Inc's iPhone sales in China continued to decline," warning that demand for the latest iPhone in China had fallen sharply, causing Apple Inc to cut production. "

Many other news sources cite the speculation of Rosenblatt Securities as facts. However, just a few weeks later, data released by the Chinese government showed that these channel inspections had no basis in reality. Sales of iPhone 11 series products in China increased by 18% over the previous year, rather than a huge failure.

More important than the number of products sold by Apple Inc, it is increasingly clear that Apple Inc is building a solid ecosystem around iPhone, selling other products, apps and subscription services that Android cannot replicate to its buyers. Now, investors see further evidence thatMing Apple Inc is providing functional services to a large user base, not just selling another phone, and their correction to Apple's earnings ratio has led to a sharp rise in the share price.

Apple Inc's current price-to-earnings ratio is about 26 times, more than double the average over the past decade, but still lower than Alphabet Inc-CL C's 28 times and Microsoft Corp's 31 times. This shows that Apple Inc's sharp jump is not unusual, but an adjustment that is long overdue. It also suggests that Apple Inc's executives are right to claim that the company is undervalued and that the best use of the company's cash is to buy back shares and write them off, transferring value to shareholders.