Piper Jaffray's Gene Munster Capitulates on Apple TV (AAPL)

Amid reports overnight from the WSJ that Apple (NASDAQ: AAPL) has scrapped plans for a full-fledged TV, Piper Jaffray analyst Gene Munster, who has long held-out that the company would release such a device, is capitulating and now no longer expects a television to launch indefinitely.

"While it is a small consolation that the article affirms that Apple was actually working on a television during that period, in the end we were wrong in our constant expectation of the product," Munster comments. "Originally we had expected that content was the reason for the delay; however, we misidentified the true reason for delay, which was a lack of perceived killer features as reported by the WSJ. We incorrectly assumed that a combination of Siri, FaceTime, a TV app store, and PrimeSense based motion control could be compelling enough as a unique feature set for the device."

The analyst doesn't see an impact on shares of Apple as a result of the news, given the fact that overall investor expectations for a television were low and Street estimates did not reflect a television.

While plans for a full-fledged TV may have been dropped, they believe Apple will continue to develop the Apple TV (set top box). "The Apple TV has not been meaningfully updated since early 2012, thus it seems overdue," Munster said. "We expect that the company will possibly preview some software or content around the Apple TV at WWDC on June 8th and ultimately launch the new device in September or October. Aside from some type of streaming content service that we have previously discussed, we expect the new box to incorporate Siri, HomeKit, and possibly an Apple TV app store."

Munster also believes that Apple has intentions of doing something in the living room beyond the set top box. Looking out over the next 10 years, he said it is less likely that the television will be the centerpiece of the living room with the evolution of virtual reality and augmented reality. "We believe that Apple is actively working on early virtual and augmented reality products, although we may be 5+ years away from seeing these products launched," he said.

The analyst reiterated an Overweight price target of $162 on AAPL.

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