Why Apple TV Could be Bigger Than You Think

TheStreet.com

NEW YORK (TheStreet) - An Apple AAPL -branded television set has been rumored seemingly forever, and now analysts are starting to incorporate it into their earnings estimates.

Jefferies analyst Peter Misek raised his Apple price target to $800 per share on Thursday, noting that the tech giant's likely to introduce an Apple TV set in the fourth quarter of this year. Foxconn's recent investment in Sharp is an integral part of getting components for an Apple TV, according to Misek, echoing TheStreet's take on the deal.

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"We believe the Hon Hai/Sharp deal is due to Sharp's increasing importance to Apple and iTV," explained Misek, in his research report. "Our recent checks in Asia indicate that specialty components have begun to ship to Apple's Asia panel suppliers with polarized films, filters, and IGZO (Indium Gallium Zinc Oxide) components starting to move in small quantities."

Misek assumes the iPanel, as he's calling the device, will sell for $1,250 and have 30% gross margins, and would allow Apple to sell an additional iPad or iPhone due to the halo effect. He believes as many as 2 million Apple television sets could be sold in the fourth quarter of 2012, and 10 million in calender year 2013. The analyst raised his fiscal year earnings per share estimate to $53.98, well above the $49.20 that Wall Street is expecting.

Other analysts have raised their Apple price targets in recent days, with Topeka Capital's Brian White giving Apple a $1,001 price target, the highest on Wall Street.

Apple CEO Tim Cook has dropped hints about a potential television set, saying "Apple doesn't do hobbies as a general rule," when speaking about Apple's existing set-top box, the Apple TV. He followed that up by saying that the company "always thought there was something there, and that if we kept following our intuition and kept pulling that string, we might find something larger."

An Apple television set could "disrupt the status quo" according to Barclays Capital analyst Ben Reitzes.

Reitzes believes that an Apple-branded television set could make headwinds in the $180 billion LCD TV hardware market. The Barclays analyst believes that Apple could take 5% of the market with a set costing $1,500. He assumes 40% gross margins on the device, which means an Apple-branded TV could add $5.40 in earnings in fiscal 2013.

"Apple's eventual television could be so much more than a TV - including gaming, video communication, content delivery, apps, computing and all the capabilities of the current Apple TV - that it is really not fair to compare it to products already on the market," Reitzes wrote. He rates Apple "overweight" with a $730 price target.

Since Steve Jobs first spoke about a television set in his biography, speculation has run rampant about the technology. "It will have the simplest user interface you could imagine," Jobs told biographer Walter Isaacson. "I finally cracked it."

While Apple TV remains shrouded in secrecy, there's little doubt that consumer excitement about the rumored device will continue to escalate.

Apple declined to comment for this story.

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--Written by Chris Ciaccia in New York

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