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Apple predicted to surprise with Oct. 19 earnings report

New accounting rules are expected to push Apple's stock even higher, as Wall Street still underestimates the profitability of the iPhone, a new report has concluded.

Last week, the Financial Accounting Standards Board approved a change to the revenue reporting methods in the generally accepted accounting principles (GAAP). Under the old rules, Apple was required to spread its profits from the sale of each iPhone over the term of the carrier contract for the device, typically two years.

In a new note to investors, Yair Reiner of Oppenheimer said that despite all of the publicity of under-reported iPhone revenue, the market still doesn't fully realize, and that will take time. The company has reiterated its outperform rating for AAPL stock and has increased its price target to $210 per share.

"Incredibly, despite all the ink spilled over iPhone accounting, we think the Street continues to highly underestimate Apple's GAAP earnings," Reiner said. "We grant this will likely become a moot point within six months, as Apple incorporates new FASB accounting rules and recognizes more iPhone sales at time of sale. But until then, Apple's EPS will continue to surprise to the upside, even if revenue comes merely in line with Street expectations."

The report said that Apple could sell an additional 7 million to 8 million iPhones in 2010 by adding Verizon and China Mobile as carriers. While a jump from AT&T to Verizon in the U.S. has long been rumored, Apple is reportedly already in negotiations with China Mobile, the world's largest wireless carrier, to offer the iPhone.

Factoring in a potential launch of Apple's long-rumored tablet, the report also sees an additional 50 cents to $1.00 earnings per share, assuming the product could sell a half-million to one million units per quarter at $1,000 each. Sources have told AppleInsider that the 10-inch touchscreen device will debut in early 2010.

Apple is set to announce its fourth-quarter earnings in a conference call on Oct. 19, scheduled for 5 p.m. ET and 2 p.m. PT, the company announced this week. The company's fiscal year ended Saturday.