Putting iPad Pre-Orders in Context

| About: Apple Inc. (AAPL)

Let’s put the iPad pre order in its proper context. Only an Apple (NASDAQ:AAPL) freak would buy a product without ever trying it out. If the estimates are correct, and iPad pre orders sold more than 150,000 on the first weekend of availability, it means that Apple generated close to $100 million dollars in revenue. Keep in mind, there is much debate as to whether this iPad category will even succeed. It’s not a phone and it’s not a computer. Some analysts have labeled it as nothing more than a small entertainment niche for Apple’s pipeline.

Industry data shows that 4-5 million tablet computers are sold annually by all manufacturers combined. Popular e-readers by Amazon (NASDAQ:AMZN), Sony (NYSE:SNE), and Barnes and Noble (NYSE:BKS) are increasing in sales but have yet to reach 5 million units. Apple is trying something new and we're all watching to see if it will work.

So far Apple remains silent regarding official iPad sales and reservations, which is causing the stock to begin its downward slingshot trend. But this is all irrelevant short term action. What do the 150,000 sales really mean for Apple in the long run?

First of all, we still have two weeks until opening weekend. Apple stores are making the reservation process for in store pickup as convenient as they can. This is the way the masses will make their purchase. Amazingly enough, it looks like the iPad is well on its way to a better launch than the initial iPhone that sold 270,000 units on opening weekend and reached 1,000,000 units sold after 74 days. We all know what a start like that can do to the stock over the long run. The idea that Apple has a legitimate fourth category to add to its iMac, iPhone, and iPod lines is turning into a reality.

The beginning of a new product category is an opportune time to invest in Apple stock. Consider that Apple stock was priced at $9.07 when the initial iPod was released and it was priced at $122.04 when the initial iPhone went on sale. If you think that demand for the iPad is going to be significant, as was shown from the first weekend of pre orders, than you can expect Apple stock will perform as it has in the past.

iPad sales aren't the only good numbers coming out of Apple. In a recent note from Piper Jaffray’s Gene Munster he mentioned that February Mac sales are tracking 43 percent growth year over year. In a research note from Canaccord Adams' Peter Misek he mentioned that iPhone sales are soaring past estimates and should reach 7.9 million units in the quarter compared to 3.79 million units last year. These numbers are impressive. The fundamentals of this company are firmly in place to bring this stock to $500 a share by 2012.

Disclosure: Long aapl

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