Apple's accounting makes GAAP numbers worthless
Posted
Oct 23 2008, 01:33 PM
by
Kim Peterson
Rating:
Andy Zaky of Bullish Cross is practically begging everyone to ignore Apple's GAAP numbers from now on. That's because Apple doesn't recognize iPhone revenue immediately under its subscription method of accounting. Instead, it slowly recognizes the revenue over a two-year period.
With Apple's red-hot iPhone sales, that means a huge chunk of revenue is missing from the GAAP numbers.
"This should infuriate the informed investor because it means that Apple is quite literally trading on P/E ratios that do not reflect more than half of its business," Zaky writes.
If you look at the non-GAAP figures, he writes, Apple's share price is trading at around 11 times trailing earnings and seven times forward earnings. At these numbers, almost no analyst could justify downgrading the stock (as some have done recently).
Zaky is also incredulous that people aren't talking more about Apple's cash hoard, which grew to $25 billion in the most recent quarter from $21 billion the quarter before. That's a $5 increase in total cash per share.
"At this pace, and assuming Apple makes no big acquisitions, Apple could very well have nearly $48 per share in cash and cash equivalents by the time we hit November 1, 2009," Zaky writes.
