Apple’s (NASDAQ:AAPL) iPad 2 is off to a great start, building on momentum from the original version launched in April 2010. Apple recorded iPad 2 unit sales of close to 1 million in the very first week. Comparatively, it took the original version 28 days to hit that mark.  Although these figures are highly encouraging, the iPad 2 will have tough competition from other products like Research in Motion’s (NASDAQ:RIMM) PlayBook, as well as Samsung’s Galaxy tablet, Motorola Mobility’s (NYSE:MMI) Xoom, and Dell's (NASDAQ:DELL) Streak – all of which are based on Google’s (NASDAQ:GOOG) Android OS.
Amid the excitement and competition for the iPad, it’s interesting to note that the iPad represents only 7% of Apple’s stock value by our analysis. Hence any sudden surge in iPad unit sales actually has a limited impact on Apple’s stock value.
While we anticipate that Apple’s iPad 2 unit sales will cross 54 million by the end of our forecast period, Trefis members predict more substantial growth towards 62 million.
We currently have a price estimate of $420 for Apple’s stock, about 25% above market price.
iPad 2 – More Features at a Competitive Price
The iPad 2 has more features than its earlier version, including a faster A5 processor and front and rear facing cameras. It is designed to be thinner and lighter than the first iPad. It also has a better battery life of above 10 hours compared to Xoom’s 8.3 hours and Galaxy’s 6 hours.  Apple has kept the pricing competitive for the basic model of iPad 2 at $499, with all the added features mentioned above.
But Competition Could Impact Sales
Google’s Honeycomb, the Android version designed for tablets, is making inroads into the tablet market. It provides support for big screens (7 to 9 inch), a totally revamped user interface, extensive multi-tasking and multiple home screens among other features. Tablets made by Motorola, Samsung, Dell, Viewsonic, Asus, and LG are all powered by the Android OS.
If Google can mirror its smartphone OS success in the tablet market, Google could soon overtake Apple (see What Happens to Apple if Android Gains Steam in Tablets). We have also previously highlighted how increased competition from Xoom in the high end of the tablet market could hinder average pricing and margins for Apple’s iPad business segment (see Xoom Could Take a Bite Out of iPad’s Profitability).
Trefis Community Forecast
Trefis members forecast that iPad units sales will increase from about 15 million in 2010 (not a full year of sales) to 62 million by the end of our forecast period, compared to the baseline Trefis estimate of an increase to 54 million during the same period. The member estimates imply a slight upside to our $420 price estimate, given the iPad’s relatively small (7%) contribution to Apple’s overall stock value.
- Apple iPad 2 sales seen clearing 1 million units, Reuters.com, March 14, 2011
- iPad 2 Review, Engadget.com, March 9, 2011
Disclosure: No positions