Sterne Agee analyst Shaw Wu has upped his price target for Apple stock for the second time since the iPhone 5 release. He now believes the stock will hit a stratospheric $840 based on two things: iPhone 5 and iPad Mini.

Wu predicts iPhone 5 sales of 27 million units in the current quarter, up a million from his previous prediction, and 46.5 million units in Apple’s next quarter, which starts in December. He did note that supply-chain constraints on the new touchscreens may hamper December-February sales.

I spoke to Wu, who just arrived back from Taiwan, where he was visiting some of Apple’s suppliers. He had a chance to play with the iPhone 5 after the introduction, calling it a “very compelling upgrade” due to the larger screen, faster processor, and improved maps.

“Despite the fact that a lot of the reviews are somewhat lukewarm, we think this phone will sell extremely well,” Wu said. “This isn’t the first time that iPhone has been panned.”

Above: iPhone 5

Image Credit: Apple

iPhone 4 had Antenna-gate, iPhone 4S was not different enough, and iPhone 5 doesn’t have LTE, NFC, or a significantly new innovation, Wu pointed out.

“But at the end of the day, Apple is able to produce the best phone out there.”

In terms of the iPad mini, Wu talked to Asian suppliers who were being told to prepare for “something,” and he suspects an October launch may be in the cards.

“From a supply-chain perspective it is ready to go,” Wu told me. “Apple has to balance the harm that rumors do to sales against spacing out the launch after iPhone 5.”

Totaling up the numbers if he is right, Wu said Apple could have a $36.6 billion September quarter and a $157 billion 2012. The $840 stock price is based on a fairly reasonable 13 times price/earnings ratio, with Apple’s cash reserves of $124 billion tacked on.

One thing I asked Wu: How accurate are your previous projections?

“It varies,” he said, laughing. “One quarter we really take pride in was last year when people over-estimated iPhone sales. The street was at 20-22 million units while actual was 17 million. We were at 18 million, so we were off too, but we were the closest.”

He paused, then added:

“I prefer to err on the cautious side.”

With Apple, that’s sometimes hard to do.

photo credit: ~FreeBirD®~ via photo pin cc