“Just when seemingly everyone was ready to give up on Apple, it shocked everyone by soundly beating earnings expectations,” Bob Ciura writes for Seeking Alpha. “The market was clearly taken by surprise, as Apple stock jumped 7%. Apple has been challenged by several headwinds this year. Apple is in-between the iPhone 6 and iPhone 7. The strong U.S. dollar is weighing on sales and profit. And, if that weren’t bad enough, there are worries over slowing economic growth in China, which is a major emerging market.”

“It is for these reasons that Apple consistently trades for a low P/E,” Ciura writes. “Apple’s persistent cheapness is certainly frustrating for investors, who are wondering if and when Apple will ever again trade at valuation multiples on par with the broader market.”

“Apple’s surprising earnings beat is the result of a key change in strategy, which has gone relatively unnoticed. It is transforming itself from a hardware company that can only grow with a new iPhone 6, 7, etc., to a company with recurring revenue growth,” Ciura writes. “This may seem minor, but Apple’s change in strategy this year will be critical to the company breaking the chains of a hardware company, and earning a higher valuation.”

Read more in the full article here.

MacDailyNews Take: In other words:

It’s the ecosystem, stupid.