Cramer Bumps AAPL Target on Accounting Rule Changes

| Apple Stock Watch

Jim Cramer, the host of the financial investment TV show Mad Money, thinks his US$200 target price for Apple's stock is too low if the Financial Services Accounting Board changes a rule that impacts how the company accounts for iPhone sales, according to The Street. If approved, the rule change would let Apple report iPhone sales in a more realistic way instead of forcing to company to spread the revenue over a 24 month period.

Mr. Cramer said that the current rules are "antiquated" and "dumb," and that Apple is being treated differently from other mobile phone makers because it is making phones that are smarter than the competition.

Apple accounts for the money it makes from iPhone sales by spreading it evenly across two years so that customers don't have to pay for software updates. Many competing mobile phone makers, however, count revenue in the quarter the units are sold and leave consumers to replace their handsets if they want new software features.

The FSAB tentatively approved the rule changes recently, but isn't scheduled to meet again until November 18. Should the organization approve the changes, Apple's estimated earnings of $9 a share for 2011 could jump up to $12 -- a substantial boost for the company and investors.

Mr. Cramer raised his target price for AAPL from $200 to $264. Apple is currently trading at $179.65, up 4.49 (2.56%).

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Comments

Constable Odo

He might not know what the hell he’s talking about, but lots of people do have a tendency to listen to him.  His positive chin-wagging probably enticed people go out and buy Apple and that’s why the big jump today.  I’m glad with the results.

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