Apps, international reach seen as main obstacles

Financial analysts are raising estimates for Apple performance following the company's announcement of 3 million iPads being sold. "We as well as the Street, continue to underestimate demand for iPad," says Kaufman's Shaw Wu. "Part of the reason is that the iPad, as a tablet, is a relatively new product category where it fits in between a smart phone and a notebook PC. And of course, we are arguably still in a recession amid still-high unemployment levels where it is prudent to be conservative. AAPL continues to defy gravity, in our view, as its products continue to be hits in a tough environment."

Wu is now raising fiscal Q3 iPad estimates from 2.7 to 3.3 million units, and CY2010 numbers from 8 to 9.7 million. Correspondingly, Q3 revenue and EPS figures have been bumped from $14.9 billion and $3.15 to $15.2 billion and $3.20. FY2010 estimates have been raised from $60.5 billion and $13.70 to $61.1 billion and $13.80, while FY2011 projections call for $71.2 billion and $16.15, instead of an earlier $70.4 billion and $16. The Kaufman price target for Apple stock has been edged up only slightly, from $340 to $342.

Any success the iPad might have is based on apps, Wu argues, in particular titles that genuinely exploit having a larger screen and a faster processor. Progress is allegedly being made in this regard, given the existence of more than 11,000 iPad-native titles.

UBS' Maynard Um adds that an essential component of sales is international distribution, since Apple is continuing to expand the number of countries with the device, which should keep the pace steady. For FY2010 he is now calling for 6.8 million iPads instead of 4.8; for FY2011, estimates have been raised from 9.7 to 13.7 million. Revenue and EPS calculations have been upped to $14.8 billion and $3.01 for fiscal Q3, $60.3 billion and $13.55 for FY2010, and $67.2 billion and $15.20 in FY2011.

by MacNN Staff