How high will AAPL fly?

@iPhonerulez, Foxconn is not a mainland Chinese company. It is Taiwanese-owned. It only manufactures in China.

@Randy,
One, AT&T takes the subsidy hit, up front, not every month.
Two, Cook or Oppenheimer stated clearly in the conference call that they had not decided yet, what portion of the revenue will be deferred to account for upgrades. Clearly, not ALL the revenue will be counted in the quarter received. I estimate $20 will be deferred per iPhone. How? The iPod touch gets the same OS upgrade for $10. A new OS is planned for each year. The typical life is 2 years. Do the math.

Enron did not book actual revenues in the quarter incurred. It amortized fallacious future estimates of revenues. If you don't know the basic facts, please don't comment.

@Randy,
Have I read this comment of yours before? Do you just repeat this stuff?

Unfortunately for you, the EXACT OPPOSITE is happening relative to Enron. Enron booked fictitious future profits by using fallacious mark to market estimates. Apple has been deferring actual profits that are sitting in its bank accounts.

You presume that Apple is going to count future revenues from AT&T. This is not the case. Apple gets a little more than $600 from the iPhone, with ASP of the iPhone around $300, and average subsidy from the carrier of around $300. This revenue is in the bank. It's not future revenue. Your assumptions are wrong, and thus your conclusions are wrong.

If you don't believe me, look at Apple's cashflows.

There's a new article at http://www.roughlydrafted.com for you, if you want to understand what is actually occurring with non-GAAP and GAAP.

My less than precise spreadsheet that I use to tally Apple price targets shows Societe Generale made an upgrade on 9/4 to $255.

AT&T just announced 3.2m iPhone activations, 2m new subscribers (most ever in a 3rd qtr), and record-low churn. Now we understand Verizon's panic and the map and Droid commercials, as the situation seems to be worsening. When does VZW report?

@Randy

Also, according to Oppenheimer, Apple will not be immediately booking the full revenue received from each iPhone sold. It will still defer that amount equal to the estimated value of future software updates delivered over the life of the iPhone, estimated to be 24 months. Apple has not yet announced what that amount will be.

@Randy

For the original iPhone (now known as the 2G) released in June 2007, which was not subsidized by AT&T, and thus sold by Apple for $399-$599, Apple received a portion of the monthly fee from AT&T, estimated by analysts to be about $10. Most of those 2-year contracts are now over. (AFAIK, this type of agreement was not made with any of the European carriers that sold the iPhone 2G in late 2007/early 2008.)

This AT&T agreement changed with the release of the subsidized iPhone 3G in July 2008, for which Apple collected $199 or $299 from the customer plus the AT&T upfront subsidy (estimated to be $375-400). AT&T issued a press release at the time documenting this change, and its impact on its earnings.

So Randy, you are incorrect as any iPhone sold today does not produce a monthly revenue stream from AT&T (or any carrier) to Apple. In any case, Apple never used this revenue stream as the rationale for its subscription accounting.

@Randy: Nope. You are flat out, absolutely wrong. Have you ever even read Apple's SEC filed statements?

Yes, a stock won't go up forever, but this accounting is not anything at all like what Enron did, and will not be the cause of AAPL someday going down.

@Randy "Apple reported earnings Monday after the close and also announced they are going to book the entire revenue stream from ATT at the time of the signing of the contract."

I think anyone can mouth-off about what Apple said and did – BUT it would really help if you bothered to listen or read what was actually said at the conference call.

When specifically asked about this Peter Oppenheimer said. "We will be required to adopt the new accounting rules no later than the first quarter of our fiscal 2011; a year from now. But we do have the adoption of adopting earlier than that, sometime in our fiscal 2010. We are currently assessing the impact of the new rule on our accounting and reporting systems and processes. Making this change will be complex and as of now, we are uncertain as to the timing of our adoption; therefore, we don't have anything more specific to discuss with you today about this change."

So before you go spouting off facts you made up to say that Apple are Enron at least do your f***ing homework.

Out of interest you can find the whole thing here:
http://seekingalpha.com/article/167404-apple-f4q09-qtr-end-9-26-09-earnings-call-transcript?page=-1

i just KNEW that this would be another "Cramer" day for AAPL after His Egoness announced his new price target of $300 yesterday. The way the market responds to his rantings is downright frightening! And what is most scary is the fact that fund managers and institutional investors must believe what this nutjob preaches. Otherwise the impact on AAPL after a Cramer pronouncement would not be nearly as dramatic as it is. Very scary indeed!!!

@Randy

You are incorrect. AT&T or Apple sells an iPhone to you for say $200. AT&T then turns around and adds a subsidy of, say, $400 so Apple gets $600 up front for selling the phone. AT&T then charges you a monthly bill, of which Apple gets nothing.

Because Apple upgrades the iPhone software every few months, without charging per upgrade, the old standards said that they could not count the entire $600 on the day of the sale, but rather had to amortize it over the life of the maintenance (two years).

With the new accounting, Apple will now credit its $600 immediately. Which is good and bad. It's good in that it makes more sense, and it means that even a professional analyst will be able to see how much money Apple makes each quarter on iPhone sales. It's bad in that the current method means that an iPhone sold today will give them the cash immediately, but will smooth out (and support) their profits for the next eight quarters.

@Randy

The difference between Apple and Enron is that the price of a cell contract is a MEASURABLE and VERIFIABLE figure. Enron was trading in futures and phantom markets while Apple can book the income they will be receiving as it is measurable. Please do not forget they will have to reserve for cancelled contract revenue which will offset the income which they receive.

Randy – good try but you should probably dump your position, pay back your margin plus the money you owe on your short sale.

@Mark

You are not correct. Apple receives the price you pay for the iPhone (less ATT mark up) when you buy the phone and sign the contract. Then ATT pays Apple a portion of the monthly contract fee over the next two years. (One of the reasons for an upgraded phone every so often is that once the two year contract is up so is Apples revenue on that phone.) Apple reported earnings Monday after the close and also announced they are going to book the entire revenue stream from ATT at the time of the signing of the contract. As I said, this is the accounting change Enron was infamous for with their gas contracts. I'm not saying you should sell your positions in Apple today, but you would do well to be more vigilant of Apples competition and Apple soaring price. As the old saying goes "trees don't grow to the sky and stocks don't go up for ever."

@Randy: Please get some facts. Apple is not booking the revenue from a two-year cell contract because Apple doesn't sell cell contracts; your cell carrier does. Rather, Apple will be booking the majority of the sales price for its iPhone device at the time of sale (after all, they've collected the full sales price from customer and carrier), and only deferring (over 24 months) a portion of the sales price equal to the anticipated value of future OS software upgrades.

Apple investors: Don't listen to Randy or people like him. He's worse than the analysts. But do be on the lookout for what might truly derail AAPL, because the analysts don't know what that is either.

Apple is now going to book the entire two year revenue from a cell phone contract immediately. This reminds me of how Enron booked their contracts. This should have sent a sell signal through the analyst camp, but like Enron, they are jumping on the the band wagon with higher projections. If you still own Apple stock, watch it with care.

Posted By Randy B Boca Raton, FL

Randy is probably one of the few short sellers last week counting on an AAPL drop after earnings release. I'm sure a few have counted on the stock to drop and are now seriously looking for a way to cover LOL

Somebody wake up Shelby Seyrafi. He's obviously sleeping at his desk or in a closet somewhere. This dude is getting paid for his job? Must be married to the boss' daughter.

I'm trying to imagine if China citizens are going to take to the iPhone. If Apple can sell a few million iPhones a year over there, that would be great news. If Apple does decide to build a billion dollar factory with Hon Hai/Foxconn that might really help Apple/China relations and raise awareness of the Apple brand. That might help Apple sell a lot more products.

You know, it's probably a good thing that Apple's breakthrough has happened during a major recession. If they're unable to keep up with demand now, just imagine how far they'd be behind if the economy was really cooking! This gives them a chance to ramp up production as the economy recovers, and gives them a fighting chance to keep up with demand.

Suddenly, having all that cash available to massively expand production is starting to look like incredibly good business sense….

Why are stock analysts like westher forecasters? They stand soaking in a monsoon and, only then, announce a strong possibility of showers.

Actually, Jim Cramer LOWERED his estimate to $300/share.

Here's the full quote from TheStreet.com:

"Given the huge potential at Apple, Cramer said he's raising his price target from $264 a share to $300 a share."

"That translates to 30 times Apple's estimated earnings of $13 a share, or $390 a share. Cramer said since everyone would think he's nuts to suggest $390 a share, he's using a conservative price target of just $300 a share.

AAPL might become a $300 Billion corporation. Then one will have to rethink the situation.

@Randy

Ah, the old Fear, Uncertainty, Doubt argument. Let's equate Apple with Enron as it is obviously a pump and dump stock which has only got here by magic pixie fairy dust.

"If you still own Apple stock" implies that we should have dumped it all yesterday and buy into the wonderful, steady, stock such as, say, Microsoft.

Hmmm. Some of you people aught to grow up. Apple's stock price is not based on some kind of find the lady misrepresentation of fact it is based on the fact they are actually earning money through a recession. Add to that the fact that the high sales they made in the Back to School period means that in 3-4 years time these users will be entering the workplace and demanding to use Macs there too.

Comparing Apple to Enron is a bit below the belt.

Apple is now going to book the entire two year revenue from a cell phone contract immediately. This reminds me of how Enron booked their contracts. This should have sent a sell signal through the analyst camp, but like Enron, they are jumping on the the band wagon with higher projections. If you still own Apple stock, watch it with care.

Pls add Jim Cramer's upgrade from $264 to $300 to this list.

He deserves to be on the list since his very bullish vision of Apple has more pricing impact than most of these analysts.

And while we're at it, how about those excellent bloggers you're always reporting on?

Well…it looks like very few prognosticators are willing to get out in front of the curve and make predictions. They all seem to be chasing the reality that Apple is successful and growing at a rapid pace, primarily due to superior technology, design, and customer service. Hmmm, there's an idea.

I sure hope Shelby Seyrafi issued another note sometime between 24 Feb and today… Or maybe someone sent him a note to go find a new job.

First, I am sure Gene Munster from Piper would appreciate his name spelled correctly.

However, not a big deal.

[ex ped: I've e-mailed the keeper of APPLinvestor's chart to suggest he correct the spelling of Munster's name. ]

Second, Jim Cramer has historically been aggressive and off putting to many analysts with his "rogue" style and general demeanor. His ability to sway a stock irks analysts as his word is usually followed by a swing in a stock price as he is followed by millions of people. So Cramer got this one right – but not a tough one to guess. Great products and excellent leadership turns into gains.

RattyUK – great response to NY. Really not sure what he is commenting on but your speculation is probably correct. Funniest thing about Windows 7 – it runs better on a Mac.

@ny

Could you elucidate? From your short rant you could either be commenting on their recent "success" for second-guessing Apple's last quarter OR maybe you are a big Windows fan and are upset at the most recent set of upgrades. I really have no idea from your comment.

What does this say about Jim Cramer, who only two weeks ago stood out as a lone lunatic at $264. Now he is eclipsed by 3 or more analysts with higher targets. He's made a lot of outrageous and incorrect calls. Perhaps this one is different?

You're all a buch of wankers with zero insight.