Why Apple Is Preparing To Launch A Sub-$300 iPad

by Trefis Team
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Apple (NASDAQ:AAPL) is expected to conduct a special event, called “let’s take a field trip” on Tuesday, March 27. While the event is likely to see the company talk about multiple education-focused initiatives, including education-oriented software, there have been reports that Apple could launch a new low-cost iPad, priced as low as $259, about 20% cheaper than the company’s current entry-level iPad model. Although it’s unlikely that Apple will turn a reasonable profit on the product if it launches at these price points, it could nevertheless help the company’s broader strategy.

Google and Microsoft have been making deeper inroads into the education market, with their low-cost Chromebooks and inexpensive Windows laptops and tablets. In 2017, the global market for educational technology products stood at $17.7 billion per Frost & Sullivan. Apple accounted for 17% of mobile computer shipments to American students and with the new iPads, the company would be better equipped to cater to education customers and first-time buyers. While the margins on the product are likely to be low, it could serve as a steppingstone of sorts into the larger Apple services and product ecosystem. For instance, by enticing schools with low-cost tablets, Apple could sell more expensive products such as MacBooks and iMacs for classrooms, besides bundling higher value software products. Moreover, by locking users into its product and services ecosystem at a young age, the company could drive long-term sales of more high-margin products such as cloud-based services and iPhones.

We have created an interactive dashboard analysis that breaks down our $187 price estimate for Apple based on its expected performance in 2018. You can modify key revenue drivers for the iPad, iPhone, and Services business to arrive at your own price estimate for Apple stock.

 

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