RBC Capital's Mike Abramsky: 'New iPad' - Incremental? Really? We would argue it will maintain Apple's Tablet dominance, especially when considered in context with Apple's powerful ecosystem (iTunes, iTunes Store, iCloud, iOS, App Store, carrier/store distribution, etc)... The new iPad raises the performance bar, with the highest resolution screen on a tablet and the A5X processor offering 4x performance vs. the NVIDIA Tegra 3, while 4G LTE eliminates one of iPad's biggest missing features. Estimated calendar 2012 iPad sales: 62 million
Deutsche Bank's Chris Whitmore: Lapping the competition again; iPad positioned to dominate the category. We believe competitors (Android and Windows) will have trouble matching the price-performance specs of the current iPad product lineup and AAPL should continue to dominate the category... Specifically, we believe both Android and forthcoming Windows tablets will have difficulty competing with the iPad on a price-performance, application support and ecosystem standpoint. We view our 60M iPad estimate for CY12 as beatable.
Goldman Sachs' Bill Shope: The iPad story gets another boost; raising target price. We believe the new iPad and the lower price point for the iPad 2 will enable Apple to continue its momentum and tablet market dominance, and we continue to expect rapid installed base growth in 2012 and beyond. Nearer term, the mid-March availability of the new iPad could allow channel fill to boost March quarter shipments relative to expectations. Overall, we expect the new iPad and the lower priced iPad 2 to encounter robust demand and we are raising our iPad estimates as a result. We now forecast iPad units of 53.4 million in FY2012, 67.7 million in FY2013, and 80.0 million in FY2014 up from our prior estimates of 51.5 million, 64.0 million, and 75.4 million. Target price: $660 (from $600)
CitiGroup's Richard Gardner: iPad 3 Keeps Apple Clearly Out in Front of the Pack; Reit Buy. With the addition of so many new features at the same prices as iPad 2, Apple has once again made it nearly impossible for competitors to undercut iPad on price and still earn a profit. While there are cheaper tablets on the market, they do not offer the screen size, screen resolution, ease of use or wealth of apps (both Apple-branded and third party) that iPad does. iPad 3 leaves us convinced that Apple will continue to dominate the tablet market throughout 2012. ... iPad 3 clearly costs more than iPad 2. We believe Apple has added ~$75 in cost to the platform, which equates to ~10 percentage points of negative GM impact. However, the initial impact on overall company GM is less than a percentage point and should be more than offset by strong iPhone momentum in 1CQ12.
J.P. Morgan's Mark Moskowitz: The Gap Widens: Apple Adds to Tablet Lead with Improved Chip, Retina Display, and LTE Capabilities. We think the iPhoto update is another step towards making the iPad the digital hub for the mobile user. Next, having Microsoft's Office on the iPad would take the device to another level. We think that Office on the iPad is likely a 2013 event, and one that will likely make the iPad a full-fledged productivity device rather than the content-heavy consumption device of today. In our view, the incorporation of Office on the iPad could help take enterprise adoption of tablets north of 15%, versus 7-8% currently. Estimated iPad sales for calendar 2012: 55.7 million. For 2013: 69.7 millon
Canaccord Genuity's Mike Walkley: New iPad extends tablet lead. We believe the new iPad has raised the bar relative to competing tablets with impressive hardware specifications, competitive pricing, and the leading software ecosystem that includes over 200k iPad-specific applications. ... In addition, we believe Apple's pricing of the new iPad ($499 for WiFi-only, $629 for 4G base models) and iPad2 (reduced to $399 for WiFi-only, $529 for 3G base models) will enable Apple to maintain dominant share of the growing tablet market. Reiterate $665 price target.
Morgan Stanley's Katy Huberty: Cheaper iPad 2 Drives Incremental Demand With Minimal Gross Margin Impact. The new iPad, incorporating many key features first introduced by iPhone 4S last October, will drive strong demand. Our US survey in December indicated demand for 30 million iPads in the US and 81 million globally in 2012, roughly in-line with production capacity Apple's suppliers are preparing this year. Apple's iPad shipments in the four quarters post the iPad 2 introduction were 2.3x higher than the prior four quarters. For comparison, our model conservatively implies 1.2x unit increase post this year's introduction. The same 2.3x increase would suggest about 90 million units in CY12, much higher than our model of 51 million.
Jeffries' Peter Misek: iPad 3 announcement as expected. Difference vs. expectations: the chip appears to be a dual-core with quad-core graphics vs. our expectation of a quad-core chip. We see this as more a difference in chip architecture and expect performance to be similar to what we thought with the quad-core. Also, the new iPad does not have Siri, which we find perplexing. We think this could be a software update in the future. Finally, the new product will be called "the new iPad" rather than the iPad 3. We think this implies that future updates will mainly be driven by software rather than hardware, so Apple is switching its naming practices to be closer to those of the Macs and iPods.
CSLA's Ari Silver: Extends first-mover advantage. Apple's iPad event held few surprises but still highlights its first- mover advantage and underscores competitors' challenges in trying to undercut Apple and still turn a profit. We argued for an LTE iPad since June 2011, and the LTE functionality should serve as a precursor for iPhone5 which we fully expect to incorporate both FD- LTE (Verizon, etc) and TD-LTE (China Mobile). The extent to which cellular connected iPad sales grow as a percentage of total shipments will support higher iPad gross margin (we estimate 1,100 bp difference between the two). Of course, users would need to pay $30+ for monthly data plans of 2GB and up. We believe iPad3 kicks off a year of major product cycles for Apple that will usher in a completely redesigned iPhone, a smaller tablet in 2H12, and a Macbook Air refresh. We see a full-blown Apple TV as a 2013 event, not 2012. Price target: $615 (from $550).
Morningstar's Michael Holt: The new iPad: Apple Extends its Tablet Lead. Apple's short-term momentum looks unstoppable. Triple-digit growth rates will slow, but as we look five years down the road, some of the most important drivers of valuation include estimating how big the addressable market for smartphones will grow and how much share Apple can carve off. Once share is secured, we believe users Fiscal Year: Price/Earnings become tethered to the Apple ecosystem that will drive their purchasing decisions for years to come.
Sterne Agee's Shaw Wu: Announces new 4G LTE capable iPad; cuts iPad 2 pricing; iPhoto gets more social. We view 4G LTE wireless as arguably the most important new feature. The reason is that it is substantially faster (up to 10x more at 73 megabits vs. 7.2 megabits for 3G) and AAPL's first mobile device to incorporate it. In addition, unlike competitors, AAPL is delivering strong battery life (9 hours using 4G LTE and 10 hours on 3G). We do not believe this can be easily replicated as AAPL is unique in the industry with its core ownership of key intellectual property including battery chemistry, systems design, and software.
Barclays' Ben Reitzes: Software Ecosystem Stands Out With the Faster iPad Line. While many will focus on the features of the new iPad vs. expectations, we believe that Apple's software ecosystem is the key driver of sales of iOS devices. On this front, Apple did not disappoint. Like the iPhone in smartphones, the iPad is the most usable tablet in terms of software, apps and access to the cloud. We believe consumers understand this value proposition, which helped propel iPhone 4S to record levels last quarter. As a result, we believe that today's announcement continues this trend – as Apple's value proposition could bring upside to iPad ASPs and unit sales throughout the year. Maintains $710 price target.
Evercore Partners' Robert Cihra: New iPad as Expected and We See Yet Another in September. New A5X processor doubles graphics performance and we think shrunk to 32nm from prior 45nm, but we continue to believe a new 28nm quad-core "A6" will be available ~Sept, setting up the prospect for yet another mid-cycle flagship refresh. Today's iPad timing otherwise kept in line with Apple's annual cadence post initial Jun-10 intro and iPad 2 refresh Mar-11. Reiterates $650 price target.
Merrill Lynch's Scott Craig: iPad, Apple TV a nice evolution, not a revolution. We view the launch of the new iPad and Apple TV as a continued evolution of the product life cycles, as opposed to a revolution. The iPad, clearly the more important of the two announcements to investors, has a pretty similar form factor, with enhanced display (new retina display) and networking (4G/LTE capability; optional), among other features. While the price points remain the same for the new iPad, the iPad 2 (16GB versions only now) will be sold for $100 less than new iPad 16GB. Similar to iPhone buying trends, we believe consumers will gravitate toward the newer version. Given the mid-March launch, this may pull forward into the March quarter a few million units of iPad demand (we estimate each 1 million units is $0.10+ of EPS). Maintain Buy on valuation, product trends, gross margin upside, and Street EPS revisions.
Piper Jaffray's Gene Munster: New iPad Impressive, [Long Term] Tablet Thesis Suggests iPad Numbers Too Low. Similar to the company's strategy with iPhone, Apple will continue to offer the 16GB iPad 2 at $399 for the wi-fi only version and $529 for the 3G version. Given the 8" Kindle Fire ($199) and several lower-priced 10" Android Tablets, we see the price reduction of the iPad 2, and the lower entry-level price for the iPad family, as a strong defensive move from Apple. Moreover, we do not see it cannibalizing iPad HD sales; rather, it expands Apple's addressable market in the rapidly growing tablet space. Estimated calendar 2012 iPad sales: 60 million.
Forrester's Sarah Rottman Epps: The New iPad: How A Gut Renovation Masquerades As Incremental Innovation. Compared with iPad 2, it has a nicer camera, a video camera, dictation input, and 4G, while still squeezing out 10 hours of (Wi-Fi) battery life. It's a wee bit thicker and an ounce heavier. And yet, in my conversations with numerous reporters over the past few days, the theme they kept bringing up was "incremental innovation": Will the next iPad be innovative enough to maintain Apple's momentum? If the iPhone 4S is a case study, the answer for consumers is a resounding "yes." We expect tablets, led by the iPad, to reach 60.7 million US adults by the end of the year, or 19% of the US population.
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