Wall Street's Thoughts On Apple's (AAPL) iPad

January 28, 2010 12:51 PM EST
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Wall Street is all aflutter on Apple (Nasdaq: AAPL) today following yesterday's iPad announcement. The new device is a cross between a cell phone and a laptop and will come to the market in 60 days at a price point starting at $499.

Analysts were mostly positive on the new device, with Citigroup the most bullish. The firm sees 10 million iPad units sold in the first year and raised their price target to a new 'street high' of $300 on the news.
  • Citigroup: "We are raising our earnings estimates and price target to reflect the introduction of the highly anticipated "iPad." Based on features, price and TAM (total avail mkt) analysis, we believe that Apple could ship 10M iPads during the first year of availability." Maintains Buy, raises price target from $275 to $300.

  • Goldman Sachs: "...we expect the near-term impact on the stock to be muted, as investor sentiment had been bullish ahead of the event and much of today’s announcement was in line with our expectations. We are updating our model with an initial estimate of six million iPads in calendar
    2010, driving $3.9 bn in revenue and $0.99 in EPS, including a small amount of cannibalization of MacBook and iPod Touch. Our new calendar 2010 and 2011 EPS estimates are $12.35 ($11.36 prior) and $14.30 ($12.50 prior)." Maintains Neutral, raises price target from $230 to $240.

  • Broadpoint.AmTech: "In our view, Steve Jobs and the Apple crew surpassed expectations with the long-anticipated unveiling of the tablet device (officially named iPad). While we were impressed with the specs during the briefing given by Mr. Jobs, it was not until we actually used the iPad for ~15 minutes were we convinced this will be another grand slam product for AAPL. The ergonomics and the "media" experience of the device (i.e. Internet browsing, e-reading and watching videos on the 9.7" screen) stood out the most to us. Clearly our 2.2mil unit shipment assumption for CY10 is conservative, and we now believe an order of magnitude higher number is likely more accurate. For example, if AAPL sells ~7mil units in CY10, our current CY10E EPS of $12.00 would rise to $13.00+." Reiterate Buy rating and $264 price target.

  • Piper Jaffray: "...pricing is lower than we were expecting. We are raising our estimates for the first calendar year of sales from 2m to 3m-4m vs. an anticipated Street consensus number of 4m-5m. We have measured enthusiasm for the device's first year (2010), but we expect 2011 to be a breakout year for the iPad adding $4.6b (7.5%) to revenue in CY11. The iPad business may take one year to solidify, but we see it as an investable theme for shareholders given its impact on CY11...After using the iPad, we believe it will cannibalize iPod touch sales, but not Mac sales." Maintains Overweight rating, raises price target from $280 to $284.

  • Kaufman Bros: "While iPad was widely anticipated, the price points starting at $499 and $629, respectively, for Wi-Fi only and Wi-Fi + 3G, are a bit more aggressive than anticipated. As we have said recently, in our conversations with supply chain sources, there are about $100 in incremental costs for a larger touch screen including semiconductors, glass, sensors, substrates, etc. so hitting these price points is quite an accomplishment. We believe this further demonstrates AAPL's unparalleled ability in convincing suppliers to invest in new markets and helping drive down component costs." Reiterate Buy rating, $253 price target.

  • Credit Suisse: "iPad arrives: Apple launched its long-awaited tablet computing device yesterday. Overall, many of the device’s features were in-line with expectations. The key positive surprises were the price point (for both the device and data plans) and the use of Apple-designed silicon. The key negative surprises included the lack of a new OS capable of multi-tasking and no carrier partnerships beyond AT&T." Maintains Outperform, $275 prcie target.

  • Canaccord Adams: "We see iPad as the first step in multi-stage growth catalysts for Apple in 2010...1.2 million units in F10 and 3.5 million units in FY11...Overall, the 'big' surprise to us was the exclusion of Verizon at this stage from iPad. We see this as likely due to AT&T's exclusivity, which we believe ends in June 2010." Reiterates Buy rating, $250 price target.

  • Morgan Stanley: "While Apple's launch of the iPad was highly anticipated, three details surprised positively versus our expectation: We view the unit opportunity at the lower than expected price as larger than we originally expected and raise our CY2010 unit forecast to 6 million from 4 million...The newly introduced Apple designed processor in the iPad could also be used across the company's iPhone/Touch product line and serve to lower bill-of-material costs as volumes scale (in addition to performance + battery life benefits)...The price of the iPad 3G plan ($15 for 250MB/$30 for unlimited data) is competitively priced versus 3G data cards and does not require a contract. That said, the lack of carrier diversification away from AT&T's network may constrain iPad 3G demand in the near-term." Maintains Overweight, $250 price target.

  • Susquehanna: "Apple revealed its much anticipated iPad tablet, which ultimately took the form of a giant iPod Touch running on the iPhone OS and a proprietary 1 GHz processor developed in-house (the "A4"), keeping with Apple's strategy of optimizing the integration of hardware and software to create a superior user experience. The iPad, which will serve to bridge the gap in Apple's product portfolio between the smartphone and notebook categories, was designed to excel in the following key functions: web browsing, email, games, ebooks, video, photos, and music. Given this function set, we believe the key to the iPad achieving broad adoption would be the price point, and Apple delivered, in our view, with a $499 starting price for the 16 GB model (right between our expectation for $400 subsidized and $700-$800 retail price points). The optional 3G broadband data plans in the U.S. were also set at attractive pricing - $30/month for unlimited data and $15/month for up to 250 MB, compared to the $60/month for a standard laptop, and importantly would be sold without a contract (3G models will cost an extra $130). However, we were disappointed that Apple kept the 3G data plan exclusive to AT&T. The iPad 3G will be unlocked with International plans expected to be available in June/July. The device will begin shipping in 60 days (with Wi-Fi only), with the 3G models shipping in 90 days. We reiterate our Positive rating and $260 price target on Apple's shares as we view the iPad as a solid addition to the company's portfolio and expect it to drive incremental earnings. Our revised model incorporates a base case estimate of 2.1 mln and 3.8 mln units in CY10 and CY11, respectively (not fiscal years). Our sensitivity analysis suggests that every 1 mln iPad units contributes an incremental $0.20 EPS (~2% of FY10 EPS) using an initial average weighted ASP of $621."

  • Jesup & Lamont: "Beyond the physical hardware, Apple appears to have done a fabulous job integrating software functions, including: web (mobile Safari browser), iTunes and App Store access while including additional media such as the New York Times and five book publishers disseminating digital e-books via the iTunes store. The Wi-Fi (n) equipped device is expected to launch in Apple stores in 60 days and a supped-up Wi-Fi plus 3G version running on AT&T's network is expected in 90 days." Maintains Buy, $240 price target.

  • Deutsche Bank: "The iPad is strategically priced to fill a void in the $400-999 range (between high-end iPhone / iPod Touch and MacBook). At these price points, we believe the iPad will compete very well against the low end NB / netbook segment (negative for HPQ, Dell, Asus & Acer) and vs. e-readers...We adjust our model to factor in 2M tablets in CY10 and 4M in CY11." Maintains Buy rating, $250 price target.

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Credit Suisse, Piper Jaffray, Deutsche Bank, UBS, Kaufman Bros., Citi, Morgan Stanley, Canaccord Adams, American Technology Research, Jesup & Lamont, Steve Jobs, Susquehanna International Group of Companies

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