A Potential 'iTV' Is Still A Key Catalyst For Apple

In a report published Monday evening, RBC Capital Markets analyst Amit Daryanani argued that Apple Inc.'s (NASDAQ: AAPL) current stock price represents an "attractive" entry point for investors to benefit from the company's ability to sustain revenue and earnings per share growth through fiscal 2015.

"We believe Apple's true differentiation is its unique computing ecosystem," Daryanani wrote. "iOS provides users with an integrated, scalable, and seamless experience across multiple devices, which we believe will be difficult for competitors to replicate in scale. Simplistically, the scale of users attracts application developers, which in turn bolsters the number of users. We believe this cycle results in a captive consumer base that transitions more data and usage via iOS on Apple devices."

Daryanani added that Apple is able to attract a larger profit pool versus any of its peers. Simplistically, Apple is able to capture incremental profits by being the OS developer, processor manufacturer, and in some instances the retailer of the product.

Daryanani expanded by stating that Apple has "multiple levers" ahead that that can drive further revenue acceleration, such as an "iTV" product and success in Enterprise markets that "open up" a higher-margin segment.

The analyst also noted Apple could benefit from iPhone 6 ramps, an iPad refresh cycle and improvements in its capital allocation policy.

Bottom line, Apple's valuation is "materially sub-par" relative to its long-term revenue and earnings per share potential.

Shares are Outperform rated with a $140 price target.