Apple Inc. (NASDAQ:AAPL) released its first quarter earnings this week and the company's stock promptly dropped by over 10%. Since reaching a high of $705 back in September, Apple Inc. (NASDAQ:AAPL)'s shares have fallen almost 40% to close the week under $440 per share. Despite this sharp decline, the media frenzy continues with Apple being labeled as a "toxic stock," described as the victim of "the $500 billion market cap curse," and as having problems that can only be fixed by firing CEO Tim Cook. What catastrophic change to the investment thesis must have occurred to warrant such a sharp swing in valuation and sentiment? Well, there wasn't one. Before panicking, investors should take a deep breath and revisit the facts behind Apple Inc. (NASDAQ:AAPL)'s recent results.

The investment thesis is intact

The investment thesis hasn't changed since Apple was declared a top 10 stock just two months ago. Take a step back and think about that; despite losing almost $250 billion in market capitalization, the story hasn't changed. Apple Inc. (NASDAQ:AAPL) reported another record quarter, sold over 75 million iOS devices, and continues to execute a broad plan for further growth. In looking at the results, the market focused on revenue that narrowly missed expectations and a conservative outlook for next quarter as the signal that the end is near for Apple's growth.

There are several problems with this knee-jerk judgment. First, Apple Inc. (NASDAQ:AAPL) reporting "only" 18% growth is a bit misleading given that the most recent quarter had 13 weeks, while the same period a year ago had 14 weeks. Eliminating the impact of the extra week drives comparable revenue growth up to 27% over the prior year. This growth was driven by record sales of the iPhone and iPad. To reiterate, these were the highest quantities of iPhones and iPads ever sold. Furthermore, the iPhone continued to gain market share in the U.S., rising 6% to 51% of the smart phone market. When combined with record revenues from iTunes and the app store, every data point favors the conclusion that Apple's popularity and the halo effect are continuing to strengthen. Add in the expected 2013 growth from product refreshes, expansion (including a likely deal with China Mobile), and potentially new products and there really is no indication that double-digit growth will stop anytime soon.

The valuation just doesn't make sense

After beating analysts' earnings per share estimates by $0.37 and generating a staggering $23.4 billion in cash from operations during the quarter, Apple now trades at a remarkably cheap valuation compared to its peers:

By any of these metrics, Apple's shares are under-priced. Add in the fact that Apple Inc. (NASDAQ:AAPL) remains debt free and currently boasts around $140 per share in cash and investments on the balance sheet, and these metrics point to even more upside to Apple's shares. Apple's management apparently agrees with the conclusion that the shares are undervalued; Apple instituted a share repurchase program during 2012 and repurchased almost $2 billion worth of its shares during the quarter.