updated 09:55 am EDT, Thu September 24, 2009
Cites new accounting rules
Piper Jaffray analyst Gene Munster has raised his price target for Apple stock from $186 to $235, basing the decision on newly-adopted GAAP accounting rules. While the change has been anticipated since earlier this month, Munster points out new details, such as discrepancies between accounting requirements and the flow of real iPhone revenue. While 90 percent of an iPhone's value is said to be generated at the time of sale, Apple was previously limited to recognizing 12.5 percent of each sale in its GAAP ledgers.
The new rules will allow case-specific revenue recognition, more accurately reflecting the iPhone's value. Munster cautions that reported earnings will still not mirror those seen in non-GAAP accounting, although the difference should now be closer to 5 percent, rather than 35 percent. It is believed that Apple will adopt the new accounting rules for its next financial quarter, rather than waiting until the mandatory deadline of December 2010.
Munster has also produced adjusted estimates for Apple's FY09 and FY10 EPS performance. The FY09 figure has been pushed from $5.71 to $8.21, while the FY10 prediction is being raised from $6 to $8.90. Each number is based mainly on the impact of the new accounting.