Apple's ( AAPL ) iPad 2 sales got off to a great start during the first weekend of its launch having sold an estimated 400,000 to 500,000 units. The iPad 2 has a few superior features over its predecessor, including a faster A5 processor as well as front and rear facing cameras. Apple competes with Research in Motion ( RIMM ), Motorola Mobility ( MMI ), Samsung, Dell ( DELL ) and LG in the tablet market. A few days back, we discussed the Apple's competitive position in the tablet market, and whether the iPad 2 can help Apple ward off new challengers (See Tablet Competitors Making a Charge, Can iPad 2 Hold the Line? ).
Here we will analyze how faster than expected iPad 2 sales could benefit our $420 price estimate for Apple stock . Our price estimate is about 20% higher than market price.
Our Quick Take
We estimate that the iPad accounts for around 7% of our estimate for Apple stock. The Piper Jaffray survey estimates that 400,000 to 500,000 iPad 2 could have been sold compared with 300,000 iPads sold during the first weekend. Moreover, 70% of iPad 2 buyers were new to the iPad, which will help expand Apple's customer base even more. This suggests that iPad 2 could be an even bigger success for Apple. We expect Apple to sell around 24 million iPads in 2011, compared to 15 million that it sold in 2010.
However, better than expected iPad 2 sales could create some upside to our estimate for Apple stock.
Similarly, the survey suggests that the % of buyers who purchased the higher capacity iPad 2 were considerably more than that for iPad. Since the 32 GB and 64 GB iPads are priced higher than 16 GB iPads, Apple also stands to gain from the higher average iPad pricing. We expect that iPad pricing could decline from $622 in 2010 to $585 in 2011.
However, if the survey estimations turn out to correct, the average iPad pricing could actually increase for 2011 instead of decline as we forecast. By dragging the trend lines above you can see how pricing and units sold will impact our base case scenario independently. To see the combined impact of multiple forecast changes visit our site.