Earnings have been a traditional way to assess a company’s stock price, but Apple’s new revenue model for the iPhone has some analysts also looking at multiples of cash flow, according to Bloomberg News on Thursday.

When the AAPL stock price reached US$100 early this year, some analysts predicted that $200 was in sight. While that prediction brought heavy criticism, those analysts are now being vindicated because of the new way some are assessing Apple stock. Moreover, they expect it to keep rising in the long term.

Basically, the iPhone is capable of generating a steady flow of cash thanks to the payment Apple gets from AT&T for every phone sold.

"EPS [Earnings per Share] significantly understates the value of the company," said Daedalus’s fund manager Stephen Coleman. "We have to wait 24 months to track the full impact of a unit sale today on earnings per share."

Robert Semple of Credit Suisse as well as Christ Whitmore at Deutsche Bank have started to use multiples of cash flow rather than just earnings to predict Apple’s stock price. In fact, a total of 12 analysts have raised their target price above US$200.

Apple has declined to disclose how much it receives from AT&T each month for each iPhone activated, but estimates put the number between $10 and $20. However, iPhones that are unlocked don’t contribute to that revenue, so investors look kindly upon Apple’s efforts to ebb the flow, including a recent move to limit iPhone purchases that might lead to grey market sales.

For Gene Munster at Piper Jaffray, there are two keys. "[First] The shipments in any given quarter are laying the foundation of what’s going to happen in the future," he said. "[Second] People are having trouble getting their arms around it because they think it’s too good to be true." Munster’s recommendation is buy.

In afternoon trading Thursday, APPL was at about US$172. However, the cause appears to be driven by an overall market reaction to Fed Chairman Ben Bernanke’s comments about the general state of the economy.

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