iPad Shipments Spike in Current Quarter, Likely to Beat Forecasts
According to a recent report from DigiTimes, Apple’s (NASDAQ:AAPL) overseas manufacturing partner Foxconn could ship 20 million iPad 2 units to Apple in this quarter, a 60% sequential growth. [1] If this report is true, iPad sales are set for a rapid growth and could easily beat our estimate of 37 million unit sales for this year. The above chart shows our estimate for iPad sales for the next two quarters of 2011.
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The iPad accounts for around 12% of our $510 price estimate for Apple’s stock and could get further boost if the actual sales beat our forecast. Our current price estimate is about 30% above market price.
Apple’s dominance continues despite rivals’ pricing strategy
If Apple is able to hit the rapid growth in iPad sales as suggested by DigiTimes, it could continue to dominate the tablet market despite increasing competition. Competitors have decided to undercut iPad pricing drastically, and a few days back, HP (NYSE:HPQ) decided to slash the TouchPad tablet price from $399 to $99.
Earlier this week, Forrester research suggested that Amazon (NASDAQ:AMZN) could sell as many as 5 million tablets in Q4 this year by undercutting iPad’s price drastically. [2] And now yesterday, Best Buy (NYSE:BBY) slashed Research in Motion (NASDAQ:RIMM) PlayBook tablet price by $150 in order to spur up its sales. [3]
Apple seems to have solved supply related constraints
Over the last few quarters, managing the supply chain issues has been one of the biggest challenge for Apple. A few months back, we had discussed how Foxconn was facing shortage of labor and material at its plants in China, which caused supply chain issues to resurface for Apple (see Supply Chain Issues Resurface for Apple). Time and again, Apple has re-iterated that they are able to sell every iPad that they can make, indirectly referring to supply related issues. [4]
The DigiTimes report suggests that Apple is seeing an improved supply chain environment. [1] We saw the first signs of improving supply chain in June this year through easing of the prices of various raw materials like memory, NAND flash memory and displays (see Apple Eyes $430 as Component Prices Improve).
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Notes:- DigiTimes report on Foxconn’s expected iPad 2 shipments this quarter, September 1st, 2011 [↩] [↩]
- Amazon may sell 3-5 million tablets in Q4: Forrester, Reuters, August 29th, 2011 [↩]
- Best Buy slashes RIM PlayBook tablet price by $150, AppleInsider, September 1st, 2011 [↩]
- Apple FY Q3 2011 earnings conference call transcript, SeekingAlpha, July 19th, 2011 [↩]