In a note sent to investors on Friday, analyst Katy Huberty of Morgan Stanley wrote that the firm's "checks in Asia suggest Apple is working on a Smart TV prototype." Though further details remained scarce, Huberty speculated that an Apple Smart TV could be an opportunity for the Cupertino, Calif., company to consolidate "TV/Video content, gaming, DVR, as well as other features like apps and FaceTime into one product," much like the company did with its strategy for the iPad.
Huberty sees Apple's rumored Smart TV as "potentially the next new product category" and predicts that an Apple-branded TV could add approximately $4 billion per 1 percent share of the TV market captured by 2013.
The analyst also cited three other under-appreciated growth catalysts for Apple in her note: sales growth in Asia Pacific, especially China; expansion of iPhone price points leading to increased smartphone market share and continued dominance of the fast growing tablet market.
Projecting 60 percent annual revenue growth for Apple in Asia Pacific, excluding Japan, Huberty sees the Asian share of Apple's revenue approaching 30 percent in 2013. Huberty also noted that the Asia Pacific region tends to skew toward mobile devices, resulting in a higher profit margin for the company.
Huberty predicts an LTE iPhone from Apple in 2012, with Apple marketing older 3G iPhone models to developing markets. According to the analyst, new features and faster performance of an LTE iPhone could preserve the device's $600 price point, while 3G iPhones would sell for a lower average selling price in countries like China, India and Brazil.
With the international launch of the iPad 2 set to begin on Friday, Apple's lead in the global tablet market is expected to widen. Huberty's long-term view of the device projects adoption rates similar to the iPod. Citing weak sales of non-Apple tablets in the first quarter of 2011 and mixed reviews for upcoming devices, Huberty predicts Apple will easily maintain "well north of 50%" of the tablet market.
Huberty maintains a price target of $410 for Apple stock by November 2011. In a bull case scenario, the analyst sees shares of Apple possibly reaching as high as $540, assuming 55 percent iPhone growth and 74 percent iPad growth. According to the analyst, a bear case scenario could see Apple stock drop to $270 due to the possibility of lower margins and concerns over CEO Steve Jobs' health.
Regarding rumors of a Smart TV from Apple, Huberty is not alone in her prediction. Analyst Gene Munster of investment bank Piper Jaffray has long held the belief that Apple will release a connected television in the near future.
"While Apple's commitment to the living room remains a 'hobby,' we continue to believe the company will enter the TV market with a full focus, as an all-in-one Apple television could move the needle when connected TVs proliferate," Munster said in a note to investors earlier this year. Munster sees a rumored $3.9 billion supply investment for display components by Apple as a possible indication of an upcoming connected TV.
Though Munster does not see an Apple-branded TV coming in 2011, he predicts that Apple could sell 1.4 million units in 2012, adding as much as $2.5 billion in revenue to the company's top line.