Does Apple Inc. (AAPL) Really Need a Smart TV?

On Apple Inc. (NASDAQ:AAPL)’s Q1 earnings call, Cook said “there is actually very, very good growth” in the Apple TV, adding that “there is a lot we can contribute in this space and so we continue to pull the string and see where it leads us.” That comment classifies as cryptic at best, but it’s worth noting that even at 2 million units per quarter and a price of $99 per unit, Apple’s revenue potential from this area only maxes out around $800 million per year. For a company expected to make $183 billion in total revenues this year, the Apple TV in its current form represents but a drop in the bucket.

The ‘iTV’ represents a much larger upside.

With these facts in mind, we can understand why it would make sense for Apple Inc. (NASDAQ:AAPL) to be considering the production of a full-scale smart television, dubbed the “iTV” by most pundits.

What’s important is that many firms on Wall Street, including Morgan Stanley, forecast that the introduction of such a device could generate annual domestic sales of $13 billion in its first year. This upside swells fourfold if a smart TV is introduced globally, indicating that it could do wonders for investors worried about Apple’s slowing growth. Moreover, the content partnerships that the company has developed through its set-top box are easily translatable to a so-called iTV.

Valued at 8.9 times forward EPS and a price-earnings growth ratio near 0.75, there’s nothing stopping value investors from joining Apple’s investor base, but the introduction of a full-fledged TV would undoubtedly pull more growth-oriented buyers into the picture. If the company can use some of its $137 billion cash hoard to boost its 2.3% dividend yield, more income investors would join the party as well.

It’s wholly possible that both of these scenarios can happen in the next 12 months, if not sooner, meaning that Apple Inc. (NASDAQ:AAPL)’s dark days may soon be over.

Disclosure: I have no positions in any of the stocks mentioned above