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  • An Evening with George Shearing & Mel Torm�

    • 10 out of 10
    • Mel Torm� & George Shearing
    • Of the three men who taught me how to sing, the last was Mel Torme. Apparently, Mel Torme is a joke to anyone more than a decade older than me, a living parody of a Vegas crooner. But I stumbled on th
  • The Stooges

    • 8 out of 10
    • The Stooges
    • Another pillar of my musical foundations, The Stooges' first album is one those records whose influence far outweighed its popularity. Like The Velvet Underground & Nico, hordes of people wh

  • Album Of The Year

    • 10 out of 10
    • Brother Love
    • Killer grooves, catchy riffs, edgy vocals with oh-so-just-right layered harmonies, and a drive that will move even YOU out of your chair, Brother Love's initial release is what rock and roll should be
  • Life's Rich Pageant

    • 8 out of 10
    • R.E.M.
    • In the long series of R.E.M.'s evolution, this album (finally?) showcases their ability to capture on tape what had been happening in the live for years: heartfelt, sweat-filled performances that just
  • The Wall (Deluxe Packaging Digitally Remastered)

    • 10 out of 10
    • Pink Floyd
    • Okay, someone had to say it, and though others on the iPO staff are more qualified to review this album, I decided the time was now. This is the quintessential concept album. Though others came before

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News

Apple’s iPhone Fees Fuel Analyst Assessments

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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In the interest of full disclosure, the author holds a small share in AAPL stock that was not an influence in the creation of this article.

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