| Merrill Lynch today raised its 12-month price target on Apple stock to $102 from $85 based on hints of a new collaboration with Sony. In a research note to clients, analyst Steven Milunovich said that Sony President Kunitake Ando's appearance at Steve Jobs's Keynote at Macworld Expo San Francisco in January may foreshadow an upcoming partership between tne companies. Milunovich said that such a partership would help bolster Apple's position in the digital consumer revolution and speculated that it could take the form of an iTunes-like iMovies Store and/or new products based on the recently announced IBM/Sony/Toshiba Cell processor. "We speculate that an Apple/Sony partnership could take the following forms: (1) an iTunes-like iMovies Store online using the H.264 codec and streaming Sony and Pixar content, (2) a high-performance Apple workstation using Cell for video editing, and (3) a network-centric TV with computing for handling the next-generation of entertainment feeds."
The report indicated that such a partnership was not based on explicit knowledge of Apple future plans but represented "logical conjecture", as Apple tries to expand and evolove its digital lifestyle strategy. "Such offerings, however, would put Apple at the heart of the HD and digital consumer revolution and provide grist for further earnings increases and stock price appreciation."
Milunovich's new price target of $102 is supported by a two-stage discounted earnings model that assumes post-F2006 earnings per share growth of 33% for five years followed by sustained EPS growth of 5% per year, according to the report. The analyst also noted that the stock would have increasing real option value embedded in the stock as the company leverages iPod success into new product lines.
Yesterday, UBS also raised its 12-month price target on Apple stock, citing the upside of Apple's software business and Piper Jaffray maintained an "outperform" rating on Apple.
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