Piper Analyst Bumps AAPL Target to $235 on Accounting Rule Change

| Apple Stock Watch

Piper Jaffray analyst Gene Munster sees the just approved accounting rule changes as a positive for Apple -- so much so that he raised is 12 month target price for the company's stock from US$186 up to $235. Accounting rule changes will let Apple account for iPhone sales in the quarter they happen instead of over a two year period.

The new accounting rules will also boost Apple's earnings per share by about 44 percent in 2009 and 48 percent in 2011, according to Fortune. Mr. Munster expects Apple will show EPS at $8.21 in 2009, up from $5.71 and $8.90 in 2011, up from $6.00.

The Financial Accounting Standards Board voted 5-0 to change an outdated accounting rule that forces companies like Apple to claim some product sales over time instead of the quarter where they happened. The change is good news for companies that have been forced to account for some revenue over several quarters.

"Before yesterday's ruling, any product that offered free upgrades to software and services installed on a device like an iPhone required subscription accounting (revenue deferred over eight quarters in the case of the iPhone and Apple TV)," Mr. Munster said. "While the value at the time of purchase as a percentage of the purchase price is debatable, we believe about 90 percent of the value of an iPhone is realized at the time of purchase. Under the previous rules, Apple was only allowed to recognize 12.5 percent (1/8th) of the revenue from each sale; under the new rules, the percentage will be decided on a case-by-case basis for each given product."

Mr. Munster raised his target price for Apple's stock from $186 to $235. Apple is currently trading at $184.05, down 1.45 (0.78%).

Sign Up for the Newsletter

Join the TMO Express Daily Newsletter to get the latest Mac headlines in your e-mail every weekday.

Comments

Constable Odo

Everyone that looks at the accounting change sees it differently.  Some say its a big deal, others say not.  I just hope it fools investors enough to pour money into this company.  It’ll be a shame if the change is already baked into the current share price as some people have said.

Bosco (Brad Hutchings)

Of course it’s baked into the current share price. This has been one of the factors that let AAPL have a higher P/E than companies in its sector. Surely there are other factors, but this accounting change will likely bring the P/E down a bit. iPhones are still in rapid growth mode. If this change came later in the iPhone curve, it could have actually hurt future AAPL quarterly revenues!

Munster is a tool. He couldn’t wait more than two weeks since whiffing on his previous expectations to predict share price. Why do we listen to him? He’s worse than a stopped clock.

Boris Gates

Munster is a tool. He couldn?t wait more than two weeks since whiffing on his previous expectations to predict share price. Why do we listen to him? He?s worse than a stopped clock.

I disagree.  Munster is actually very good at seeing Apples potential, when other analysts scoff at the stock.  When the stock was at $80-$90 a little less than a year ago, he maintained his price target of around $200, or slightly less when others where crying wolf.

Time has proven his predictions to be correct, as the stock is now near his predictions from a year ago.  And, Apple has been undervalued for most of the past several years, and is way too ‘beta’ given the strength of the company!  Munster has seen through the short seller peddled BS.

Boris Gates

the accounting rules should no affect the stock much, as Apple has published the numbers both ways for the last few quarters, so the current price should have the ‘real sales’ already baked in.  Todays opinion of Munster I for once disagree with, though Munster might be correct that the brickhead analysts will see the company differently, and as more profitable, if there are not two versions of reported earnings…

deasys

it?s baked into the current share price. This has been one of the factors that let AAPL have a higher P/E than companies in its sector

the accounting rules should no affect the stock much, as Apple has published the numbers both ways for the last few quarters, so the current price should have the ?real sales? already baked in

Apple will close its fiscal year with $36 billion in cash and no debt. Now consider that next fiscal year, even the simple minded will be able to understand Apple’s profitability and growth. At the current price of about $185, AAPL is grossly undervalued.

Bosco (Brad Hutchings)

Sure deasys, but this was about Munster moving his target based on the accounting rule change. Apparently, he thinks that investors have been wearing blinders so that they don’t see what’s actually happening with cashflow. Child, please!

Log-in to comment