Apple Inc. (NASDAQ:AAPL) is the most widely discussed stock in the U.S., both on the blogosphere and on Wall Street, and it's no secret that many opinions of the tech giant have turned sour over the past three months or so. After a meteoric rise of more than 250% since the start of 2010, shares of Apple have fallen by more than 25% in the past three months, and briefly fell below the $500 mark in pre-market trading earlier today.
Courtesy: Apple Inc. (NASDAQ:AAPL)
One of the most respectable Apple analysts on the Street, though, is defending his bullish $900 price target on the stock. Gene Munster, of Piper Jaffray, expects AAPL to be investors' best friend come 2013, when he predicts the company will release a TV and the newest iterations of its iPhone, iPad, and MacBook lines.
Now, it's not that difficult to predict that Apple should release an iPhone 5S with iOS 7 next year, or even an upgrade of its laptop, but Munster has been a bit more bullish on the prospects on an Apple Inc. (NASDAQ:AAPL) TV than most of his peers. Regarding his $900 price target, Munster had this to say in a recent note to investors (via Business Insider), within a section labeled "Why The Stock Can Work Looking Forward." Here's the excerpt:
"The bottom line is that we believe AAPL needs something that investors can look forward to in the numbers for the stock to work well. We believe a core reason the stock worked in early 2012 was expectations for the iPhone 5 as the stock started the year at ~$411 and peaked at ~$702 in September ahead of the iPhone launch (71% increase at the peak). In 2011, we believe the stock worked (from $323 to $422 at the peak, 31% increase) due to anticipation of the next iPhone and iPad ramp. We are more optimistic about 2013 as we believe Apple will not only launch a television, but also a lower priced iPhone for pre-paid markets in 2014 or potentially sooner."
The most intriguing aspect of Munster's note is its mention of stock price performance in anticipation of major product releases. With reports that an Apple Inc. (NASDAQ:AAPL) TV could add between $4 and $5 to Apple's EPS total next year, it's an important point to make. In this scenario, investors could push the stock higher due to the classic earnings-based appreciation line of thinking, assuming that a television is released sometime in the fall or winter of 2013.
On average, Wall Street expects Apple to generate an EPS of $49.08 in FY2013, meaning that if Munster's prediction is correct, we could see upside of 8-10% from this consensus. Couple this potential with Apple Inc. (NASDAQ:AAPL) bargain bin valuation - below 9 times forward earnings and a PEG of 0.6 - and we can see that there's some massive value potential here.
Let us know your thoughts on an Apple TV in the comments section below, and if you think the release of such a product could act as a growth catalyst, pushing shares of the company higher over the next 12 months.
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