updated 03:10 pm EDT, Wed September 16, 2009
Tied to change in accounting rules
Apple stock prices have risen sharply within the last 24 hours, a shift attributed to a Tuesday episode of the CNBC TV show Mad Money. Shares climbed 1.6 percent between Tuesday close and Wednesday morning, leaving Apple's stock price at $178. By 12:25PM on Wednesday shares were priced at $182.72, Apple's best opening since August 2008, a month before the onset of a global economic recession. As of approximately 3:12PM on Wednesday, shares had settled down to $182.16.
During the Tuesday show, host Jim Cramer raised his price target for Apple stock from $200 to $264. The decision was based on a change in accounting rules, which should allow Apple to forgo subscription accounting on the iPhone, revealing the company's real revenue. The Street's 2011 earnings estimates will likely jump from $8 to $12 per share, says Cramer.
The host further suggests that while many money managers have incorporated non-GAAP revenue into their analyses, they are often too narrowly focused on price-to-earnings ratios. As a consequence, he proposes, they are going to be surprised when the new rules take effect. Revisions are currently in draft form and waiting for FASB approval.