HOW TO PLAY IT: The anti-contrarian on Apple's high By David Randall NEW YORK (Reuters) - Apple's first quarter in the post-Steve Jobs era was a success. Apple reported that it sold more than 37 million iPhones and some 15.5 million iPads during its last quarter after the market closed Tuesday. Its shares jumped more than 6 percent and hit an all-time high Wednesday, leapfrogging Apple past Exxon Mobil to once again become the most valuable company in the world. In what seems to be a quarterly routine, analysts scrambled to raise their target prices for the company following its earnings announcement. Among the highest target: $670, 50 percent above its Tuesday close. A stock as popular with investors as Apple typically has contrarians pointing to signs of trouble. But there are several reasons why simple contrarianism might not pan out this time. The best way to play Apple's earnings? Buy Apple. Despite gaining more than 25 percent over the last year, Apple still looks like a value stock to many investors. "The stock is cheaper now than the day I bought it," said Stephen Coleman, head of St. Louis-based Daedalus Capital. Coleman began buying Apple at $11.20 in February 2004, he said. Since then, he's notched a 3,888 percent gain. Apple is trading at a price to earnings ratio of 12. The broad Standard & Poor's 500 index, meanwhile, trades a P/E multiple of about 13. By comparison, Amazon.com, Apple's most direct competitor in the tablet market, trades at a P/E of 98. The company is trading at a discount according to other metrics as well. Based on its growth rate, the company's intrinsic value is $533.40 per share, a nearly 20 percent jump from its current share price of $446.66, according to Starmine. Its gross margins increased 4.4 percent from the prior quarter, according to Michael Holt, an analyst at Morningstar. Why aren't Apple shares trading higher? The market appears to be discounting Apple's ability to maintain its earnings growth now that it has a dominant position in the smartphone and tablet markets, analysts said. The company's forward price to earnings ratio is now just 11.1 times future earnings, according to Starmine. High forward P/Es typically imply that investors expect earnings growth to accelerate. In 2003, for instance, the company traded at a forward P/E ratio of 80 after introducing the iPod some two years earlier, according to Starmine. Apple also has nearly $100 billion in cash on its balance sheet. Possible options for that staggering sum is something that the company is "actively discussing," said Peter Oppenheimer, Apple's CFO, on its earnings call. The company's cash pile equates to $103 per share, noted T. Michael Walkley, an analyst at Canaccord Genuity. "With Apple expected to cross $100 billion in cash during the March quarter, we believe this milestone might push Apple to announce a dividend," he wrote in a note to clients. Investors may be reluctant to buy any stock hitting an all-time high. "The $430 region was formerly resistance on Apple, but with the huge gap up after earnings on Wednesday, that level now becomes very strong support," said Gareth Feighery, a founder of options education firm MarketTamer.com in Philadelphia. Feighery suggests a strategy that sees limited downside and risk for Apple shares with a so-called February $430-$420 bull put spread - buying the lower strike put and selling the higher strike put. This trade essentially allows an investor to profit from the spread as long as shares don't fall below $430. The spread involves the sale of the $430 strike put to finance the purchase of the $420 strike put to collect a premium of $1.39. The strategy offers a risk return of 16.1 percent based on the shares trading at $448. The danger is if shares fall below $430, and if assigned, the investor would be obligated to buy the stock at $430. The purpose of the $420 put purchase is to limit risk if the shares were to drop precipitously and offers protection, Feighery said. Equity put options convey the right to sell shares at a preset price any time up until expiration and are often used by investors to insure their long stock positions against a potential decline in shares. With its roles as both manufacturer and, increasingly, consumer of iPhones, China is a key part of Apple's strategy. Tim Cook, Apple's CEO, told analysts that China "is an extremely important market for us and we continue to look at how to grow it further." Investors can benefit from Apple's growth in China. China Unicom is currently the only one of China's three mobile service companies to offer an iPhone with a service contract. China Unicom will likely continue to grow earnings as the country's consumers upgrade their services. "We believe China Unicom should benefit the most from the 3G migration in China," Edward Fung, head of research at Kim Eng, wrote in a January 20 note to clients. Tsz Wang, an analyst at DBS Group Research, rates the company a buy because of its strength in the broad smartphone market. "We stress that entry-level smartphones is the key growth driver as it makes smart devices affordable to lower-spending users," Wang wrote in a January 20 note to clients. U.S. investors may want to look at funds with relatively large positions in China Unicom, rather than attempt to buy shares directly. The Prudential Financial Great China fund, for instance, invests 5.6 percent of its assets in China Unicom, according to Thomson Reuters data. The iShares FTSE China 25 Index Fund (FXI) and Vanguard Emerging Markets Stock Index (VWO) also have large positions in the company. Investors should be cautious before buying companies like Nokia and Samsung that currently have a larger share of China's mobile market than Apple, said Neil Mawston, an analyst at Strategy Analysts. "Nokia without question should be worried," he said. Apple has crushed many players in this market and they are now attacking Nokia in the developing region. Investors may instead want to buy low-priced companies that manufacture components that go into Apple's products, Mawston said. Intel, for instance, trades at a P/E of 11 and offers a dividend of 3.1 percent. Reporting By David Randall, additional reporting by Doris Frankel; Editing by Walden Siew, Phil Berlowitz