Apple (NASDAQ:AAPL) is expected to decrease pricing on the iPad over time similar to what it has done with the iPhone. We believe that this will also make the iPad more competitive with Amazon’s (NASDAQ:AMZN) Kindle e-reader, especially amongst price conscious consumers. In our analysis of Apple, we forecast how average iPad pricing is expected to trend and you can modify our forecast to see how iPad pricing impacts the $267 Trefis price estimate for Apple’s stock.
Premium Pricing
We expect that iPad will continue to be sold at a premium over the Kindle and Nook e-readers as well as netbooks made by HP and Dell. However, we forecast average iPad pricing to decline from $600 in 2010 to $440 over the Trefis forecast period.
You can modify our forecast above to see how much a faster decline in iPad average pricing could impact Apple’s stock.
Three Factors Impacting iPad Pricing
Three factors that will make it difficult for Apple to sustain iPad pricing:
(i) Price and feature competition from Kindle, Nook and Sony e-reader
The Kindle, Nook and Sony e-reader are each priced around $260, a significant discount to iPad’s starting price of $499. Although the iPad offers richer functionality, we expect that buyers interested primarily in an e-reader may prefer the lower price point of the Kindle, Nook and Sony e-readers. Furthermore, iPad’s competitors may begin to introduce additional features that will narrow the feature gap between the iPad and other devices.
(ii) Declining netbook prices
Most netbooks are priced below $400 and will become even less expensive over the next few years. Some consumers may opt for cheaper devices in a weak economy and many more may opt for netbooks instead of iPads if the price gap widens.
(iii) iPod Touch has similar features to the iPad with a lower price point
The least expensive version of the iPod Touch is priced at $199, or $300 less than the entry level iPad. The iPod Touch also lets you read e-books and e-magazines, download apps, surf the web and play games.
For additional analysis and forecasts, here is our complete model for Apple’s stock.
