How Ripe Is Apple’s Stock?

Arik Hesseldahl

Analyst Steve Fortuna at Prudential Financial thinks Apple’s stock has is about as sweet as its going to get. He downgraded the stock today from “overweight” to neutral, citing Apple’s recent run-up. Thursday it hit a new 52-week high of $62.32 a share before closing at $61.85. As of 2:18 EST today Apple stock was trading down 1.7%. Fortuna’s note says that “We fully expect a strong December FQ1 and full year FY'06 but believe the stock has now fully discounted this reality,” and that “We believe the stock is now priced for perfection.” The growth of iPod sales is going to slow he says, which given that rate has run at between 300% and 400% over the last two years, its not unreasonable. But he also says: “Likelihood of another new hit product like the iPod is low.” Here Fortuna and I part company.

I wonder how he comes to that conclusion? Now that the video-capable iPod is a reality, and a video download service is part of iTunes, I think Apple’s quest to slowly surround consumers with more products bearing that bitten-Apple logo has only begun, and I can’t imagine what company could do it better.

Microsoft and its buddies in the Wintel PC business have coveted the living room for years, but can’t seem to find the right formula that welds the TV, the PC and the Internet in a way that resonates with consumers. Microsoft has tried and mostly spun its wheels with the Media Center PC family, and Intel has a new PC concept of its own called Viiv (pronounced like “five”).

Apple’s shown some interest in the same direction with its latest iMac G5, which sports a remote control. But I wonder if Apple, now that it will be using Intel microprocessors might be a candidate for the Viiv platform. Somehow I doubt it, mainly because Apple tends to want to get ahead of the rest of the computer industry rather than follow along with the pack. But one option of the Viiv platform is an optional TV tuner card. That I think would make for a very interesting option to the iMac line.

But piping TV directly to the computer is only one way to get Apple into the home entertainment experience, and in truth, probably not the best way. I for one will be very interested to see what Apple has on tap for the next step forward in Wi-Fi wireless networking. It’s shown the way with the Airport Express, which it launched last year. It pushes music from iTunes playlist stored on a computer to the stereo over the wireless network.

Why can’t video be next? Apple is one of several companies in the Enhanced Wireless Consortium an industry group seeking to nail down a standard on 802.11n. Once Wi-Fi in the home reaches 100 megabits per second, pushing high-quality video stored on a hard drive to a TV set will be easy. And it’s been awhile since there’s been a new product from Apple on the Wi-Fi front. I suspect there are some pretty cool things in Cupertino pipeline. I’m no stock analyst, but I personally wouldn’t bet against Apple’s ability to find a way to shake up the entertainment business yet again.

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