While most continue to have a laser beam focus on the iPhone 5 for the immediate term with Apple (AAPL), we think it has something much bigger in the works. Bigger? Yes, much bigger, and it’s in front of your face.
What is it? The iPad. We’re sure there will be plenty of comments saying we already know about the iPad, but the reality is few really understand what it entails for Apple. Why do we think this? If the majority of people truly had such amazing insight into technological innovation and Apple, we would have a lot more US multi-millionaires solely from investing in Apple stock.
In our view, Apple is about to transform again as a company, given that it’s now not only the leader in new markets that never existed before but is also creating them. The iPad, in our view, will be far bigger and more successful over the long term than everyone realizes except perhaps Steve Jobs himself. This is why we feel that Apple is still a Buy even as it pierces new highs in the market.
Who's buying the iPad? Everyone!
It's always been the trendsetters and early adopters who bought items like the iPod and iPad first. Why should the iPad be so different from other ultra successful Apple products? It deals with the fact that we see five-year-olds and 75-year-olds with iPads. That’s the type of target market that literally encompasses almost every human on earth.
Few products or services over the last century have had the ability to literally appeal to every age group (including toddlers) and demographic in the human race. Normally when we think of things like this, we think TV. The automobile doesn’t even apply here, because a four-year-old can’t drive a car -- but she can use an iPad (we’ve seen it). For the first time, not only is Apple creating a new space instead of penetrating it, but it has made one that holds untold potential.
Apple’s iPad is going to ravage the PC & laptop market like an infectious disease. Why? The iPad isn’t just being used for surfing the net, entertainment, and wasting time like most people think. We see people now substituting laptops for iPads and literally working off them for hours on end. In our view, if people are substituting iPads for laptops in some fashion, we see the same thing happening relative to PCs. After all, now that Apple has launched its cloud computing service, it's not hard to imagine that the iPad will only evolve and have the potential to replace certain functionality aspects of both the PC and laptop.
For Apple, it’s a beautiful picture, given that it sells both iPads and Apple computers. Competitors such as IBM (IBM), Dell (DELL) and HP (HPQ) will now have to compete not only against Apple computers but also against a new and conventional substitute, the iPad. Further, we’re confident that the iPad of today will not be very similar to the iPad of tomorrow, given Apple’s history of aggressive evolution with successful products.
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The iPad wave that is coming will be far greater and more expansive than even the most die-hard Apple fans think. No one saw the MP3 player being a major alternative to CD players until iPod came around. An even bigger point here is that no one saw it destroying the entire CD player market. Moving forward, don’t think the iPad can’t make much bigger waves than what the mass public perceives it can.
The true potential of the iPad can be easily estimated and we realize that. After all, it can’t be easy to accurately gauge a product that's already starting to structurally change consumer society.
iPad in our view has the ability to cause substantial demand destruction to the PC and laptop consumer market. To be clear, we don’t think the iPad will destroy the entire PC and laptop consumer market, but to say it won’t substantially damage it would be an understatement. Competitors aren’t blind to this reality and that’s why they’re trying to get into this space while it’s still in its infancy stages. With the iPad in place, Apple remains a growth company.