Apple Inc. (NASDAQ:AAPL)’s valuation topped $500 billion on Friday, when shares closed at $556.07. But the company’s market value is still at a similar level as April 2012, when analysts predicted that the stock would surpass $1,000 billion valuation. In April 2012, Piper Jaffray analyst Gene Munster predicted that Apple Inc. (NASDAQ:AAPL) would become a trillion dollar company within 12 months. Apple Inc. (NASDAQ:AAPL) shares hit a peak of $705 in September 2012.

Apple

Analysts’ prediction was not irrational

Though Apple Inc. (NASDAQ:AAPL)’s shares have fallen considerably since its September 2012 peak, Daniel Eran Dilger of Apple Insider says that analysts’ prediction wasn’t irrational. Most companies peak in their valuation only after gaining market dominance. For example, at the peak of its market value, Microsoft Corp. (NASDAQ:MSFT) had 90% market share in PCs. Intel Corp. (NASDAQ:INTC) occupied 80% share in computer chips. Cisco Systems Inc (NASDAQ:CSCO) had 70% share in networking products at the peak of its valuation.

In contrast, Apple Inc. (NASDAQ:AAPL) held only 4.7% of PC market, 17.5% of smartphone market and 64.4% in tablet space. That reflected considerable room for further growth. Moreover, the other companies had high P/E ratios, in some cases more than 60 times. But Apple Inc. (NASDAQ:AAPL) had a P/E ratio of 10.7 last year.

But Apple Inc. (NASDAQ:AAPL) shares began to decline in October, and ended 2012 down 20% from the September peak. Despite the massive success of iPad Mini and iPhone 5, shares continued to tumble. The investor skepticism was driven by rising competition from Android vendors, and concerns about growth, sustained profitability and innovation. Analysts began to downgrade the stock. Apple Inc. (NASDAQ:AAPL) share prices fell to as low as $400 earlier this year. That prompted the Cupertino-based company to announce a $44 billion share buyback.

What Apple went through in 2008?

But the dramatic fall this year is nowhere close to what Apple Inc. (NASDAQ:AAPL) shareholders witnessed in 2008.  During the first two months of 2008, the stock had fallen from near $200 to $119. But Steve Jobs urged his team to keep faith in the company’s fundamentals. Apple Inc. (NASDAQ:AAPL) had a clear and focused strategy, $18 billion in cash, more than 200 retail stores and zero debt.

Apple 2008

Shares began to rise in May 2008, but crashed again in November to $82. The iPhone was in first year of its debut, and it was a highly innovative and profitable product. The roller coaster Apple Inc. (NASDAQ:AAPL) shares went through was insane. But it was inevitable because, as Steve Jobs himself pointed out, it was driven by “factors a lot larger than ourselves.”

Apple Inc. (NASDAQ:AAPL) shares jumped 0.81% to $561.10 in pre-market trading on Monday.