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Apple tops $200 per share for the first time

NEW YORK (AP) -- Shares of Apple hit the $200 mark for the first time Wednesday, as investor confidence in the company continued rising near the end of what has been a strong year for the iPod and computer maker.

In afternoon trading, shares rose $1.57 to $200.53.

Apple shares had traded between $76.77 and $199.33 this past year, before breaking $200 today, rising steadily since January as investors anticipated and then cheered the release of the company's hybrid cell phone, multimedia player and wireless Internet device, the iPhone. The product went on sale at the end of June.

Apple released a refreshed line of iPods during the year, updating its flash-based Nano model to one that can play videos, and introducing a device called the iPod Touch which is much like an iPhone without cellular calling capabilities.

The company also refreshed its notebook computers during the year.
The odds on an Apple flash laptop

In a phone interview Wednesday, Caris & Co. analyst Shebly Seyrafi said he wasn't surprised that Apple hit the $200 mark.

"Apple has a lot of momentum right now," he said, noting the company is riding several new product cycles.

Seyrafi, who rates the stock "Buy" with a $225 price target, said sales of the iPod Touch and video-enabled Nanos are helping Apple's margins. Apple's (AAPL, Fortune 500) component costs are benefiting from declines in NAND flash memory prices, he added.

Apple Stock Crash Means It's Time to Go Long on AAPL

Since Nov. 6, when Apple's stock hit a high of $195, shares have dipped a good 40 points. The slide comes because of a combination of factors. It's mostly selling by big investors, but Apple's also getting involved in a wider "tech wreck," thanks to below-par earnings from other companies and general jitters about the subprime-mortgage mess.

Closing at $153.76 on Monday, Apple's stock is looking like a bargain. Unfortunately, as a journalist, I'm ethically forbidden from holding stock in companies I write about. (And on a journalist's crummy pay, I'm perpetually broke.)

"It's a pre-Thanksgiving sale," says consultant Carl Howe of Blackfriars Communications, who follows Apple carefully (and owns Apple stock). "I've been picking it up as it goes down."

Yeah, $154 is a lot of money for a stock that was in the tank a few years ago. Who isn't kicking themselves that they didn't buy a few shares in February 1997, just before Steve Jobs took the helm again, when Apple was trading below a split-adjusted $4 a share? Since then, the company's stock has skyrocketed. An investment of just $1,000 then would be worth $38,900 now.

Still, there's plenty of upside in Apple's stock, even at today's prices, thanks mostly to the way Apple is accounting for sales of the iPhone.

Earlier this year, Apple adopted a subscription accounting model for the gadget: iPhone sales will be amortized over a 24-month period. Instead of recording iPhone sales against earnings every quarter, sales will show up as monthly revenue.

This is unusual, and Apple hasn't said why, but observers believe it's because new features will be added to the iPhone in coming months. Because of general accounting practices, Apple can't add significant new features unless it charges for them. (In January, Apple charged customers $2 for a 802.11n Wi-Fi software upgrade to MacBooks and MacBook Pros).

The company is accounting for the Apple TV in the same way. (Rumors are rumbling that Apple TV will get movie rentals and possibly HD soon).

Whatever the reason for Apple's accounting practices, sales of more than 2 million iPhones this quarter won't all be put on the books this year -- the cash will be spread out over the next two years. In addition, AT&T is paying Apple an estimated $10 monthly fee for every iPhone.

It seems that until recently, most Wall Street stock analysts overlooked this hidden revenue. In the last month, 12 analysts raised their estimates to above $200, thanks to these new streams of steady cash flow, according to Bloomberg.

Apple's average target price is now $210, and some, like Piper Jaffray analyst Gene Munster, estimate the stock will hit $250.

Blackfriars' Howe says this is entirely realistic. "People are starting to realize Apple throws off money pretty rapidly," he says. "Apple is quite a remarkable business. They've made it into a cash cow, and no one else can replicate it at the moment."

By Howe's estimates, each million iPhones sold adds $350 million to Apple's annual earnings, and $2 to Apple's target stock price. If Apple sells 10 million iPhones in 2008, that's $3.5 billion in cash and an extra $20 on the stock price.

"And of course, the iPhone is only one -- and currently the smallest -- of Apple's four lines of business," writes Howe. "So unless Apple stumbles somewhere along the way, those $250 price goals that analysts are quoting aren't ridiculous; they're just based on revenue streams and deferred revenue that aren't immediately obvious."

Howe predicts Apple's stock will hit $200 in fiscal 2008 and $300 in 2009.

Other investors are even more bullish. Fund manager Stephen Coleman, of Daedalus Capital in St. Louis, told Bloomberg that Apple's stock will hit $600 in 18 months. (That would value Apple at about $500 billion, the size of ExxonMobil, the biggest company in the United States.)

Of course, the bigger picture is that the credit crisis could crash the stock market and plunge the economy into a recession.

But don't worry about that. Buy AAPL.