Nov. 8 (Bloomberg) -- Before Apple Inc. shares cracked $100 six months ago, fund manager Stephen Coleman predicted they would surpass $200 by year-end. His post on the Web site Seeking Alpha drew ridicule from other investors.

``I was called a fool and worse,'' said Coleman, founder of Daedalus Capital LLC in St. Louis, an Apple holder since 2004. After a 67 percent rise in fourth-quarter profit, the shares reached a record $191.79. Analysts say they will keep rising.

Chief Executive Officer Steve Jobs jumpstarted optimism about the power of the iPhone, the $399 Web-surfing mobile device he introduced in June, to generate a steady flow of cash. Analysts are revaluing the stock because each sale brings Apple a cut of monthly wireless service fees from AT&T Inc., and sales of the phone are recognized over 24 months.

This has led analysts including Credit Suisse's Robert Semple and Deutsche Bank's Chris Whitmore to use multiples of cash flow rather than earnings to estimate Apple's stock price, reflecting an anticipated pileup of deferred revenue. Twelve analysts raised their estimates above $200 last month, even as earnings per share multiples reached their highest in two years.

``EPS significantly understates the value of the company,'' said Daedalus's Coleman. ``We have to wait 24 months to track the full impact of a unit sale today on earnings per share.''

Guessing Game

Jobs, 52, hasn't made it easy for analysts to create their models. Apple doesn't disclose its wireless cut or whether it gets an up-front payment for each two-year contract from San Antonio-based AT&T Inc., the largest U.S. wireless carrier. AT&T charges $60 to $220 a month.

Estimates of Apple's monthly take vary from $10 to $20 per subscriber. Cash and short-term investments at Apple rose by $2.9 billion, or 12 percent, to $15.4 billion in the fourth quarter from the third in the first full period of iPhone sales.

Apple declined to give details of its agreement with AT&T, spokesman Steve Dowling said.

Semple, in New York, says the shares will reach $210 based on a multiple of 21.7 times calendar 2008 free cash flow of $8 billion, up from $5.5 billion this year. Piper Jaffray & Co. analyst Gene Munster bases his $250 estimate, the highest on the Street, on 25 times ``booked'' profit of $9.50 a share in calendar 2009, higher than his $7.06 estimate for reported earnings. Coleman, using more aggressive cash-flow predictions for the iPhone, says the shares will reach $600 in 18 months.

Analysts also need to factor in the 250,000 phones out of 1.4 million sold through Sept. 29 that were unlocked and used on other networks, depriving Apple and AT&T of revenue. Apple has limited sales to two per customer and stopped taking cash for the iPhone to discourage resellers.

IPods, Macs, Leopard

For Munster, in Minneapolis, the key is iPhone shipments.

``The shipments in any given quarter are laying the foundation of what's going to happen in the future,'' said Munster, who recommends buying Apple shares. ``People are having trouble getting their arms around it because they think it's too good to be true.''

Apple, in Cupertino, California, also makes the Macintosh computer and iPod media player. The shares fell $10.83, or 5.8 percent, to $175.47 at 4 p.m. New York time in Nasdaq Stock Market trading and have more than doubled this year. Apple, the second best-performing member of the Standard & Poor's 500 Index the past six months, has a market value of $153.1 billion -- higher than Hewlett-Packard Co. and Dell Inc., the largest personal computer makers.

Faster Macs, updated iPods and new software are also prompting enthusiasm for Apple shares. Jobs said last month he expects the best holiday sales in the company's 31-year history and provided a forecast that topped analysts' estimates for the first time in eight quarters.

`Momentum'

``We don't need to have these killer, huge, fantastic new categories of products to keep the momentum going,'' said Jim Grossman, a portfolio manager at Thrivent Asset Management in Appleton, Wisconsin, which owns Apple shares. ``They have enough irons in the fire.''

Mac shipments set a record last quarter even as some customers waited for the new Leopard operating system that was launched on Oct. 26. Updated iPods, including one that uses the iPhone's 3.5-inch touchscreen, may reach record shipments this period. UBS AG analyst Benjamin Reitzes and Morgan Stanley's Kathryn Huberty see a Mac sub-notebook showing up in 2008.

Jobs has forecast sales of 10 million iPhones in 2008. Apple starts offering the handset tomorrow in the U.K. and Germany, in France this month and in Asia next year.

Munster anticipates iPhone shipments may surge to 45 million units in 2009, if Apple drops the price to $300. That's two to three times more than the estimates of his peers. Apple also plans to add 40 retail stores next year to the 197 it already operates.

Grossman says if he has any concern it's that Apple, expanding too fast, may compromise the customer service and product quality that help it stand out among PC rivals such as Round Rock, Texas-based Dell. High expectations could also make investors jittery.

``It's a disservice to go really nuts with some of these estimates,'' says Grossman, who calls $250 a share ``doable.''

To contact the reporter on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net.

Last Updated: November 8, 2007 16:18 EST