An accounting rule change, approved yesterday, could drive Apple’s reported earnings to the moon, and could send stock prices up, too.
The latest estimate of what the changes could do to Apple’s reported GAAP earnings comes from Piper Jaffray analyst Gene Munster, who jacked his AAPL price target today to $235, up from $185.
In a note, Munster estimates the new accounting method could drive fiscal 2010 GAAP earnings per share to $8.90, up 48% from his previous GAAP estimate of $6.00. Similarly, it could drive fiscal 2009 earnings per share to $8.21, up 44% from his previous GAAP estimate of $5.71.
Remember, Apple’s business isn’t actually changing — just the way it’s able to report iPhone and Apple TV revenue and earnings. But the larger numbers — while tucked away in non-GAAP results the whole time — will make Apple’s results look more impressive, which could drive shares up.
Previously, Apple reported iPhone and Apple TV revenue over a 24-month “subscription” period, so it could provide free software updates during that period. Now, it will be able to recognise far more money during the period it actually sells the gadgets. Munster expects Apple to implement the new technique within two quarters.
This rule will also impact Palm, which uses subscription accounting on its new Pre phone, and to a lesser extent, Amazon, which uses it for the Kindle e-reader.
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