John Paczkowski

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iPad Expectations “Over-Zealous” or Just Zealous?

March 30, 2010 at 8:22 am PT

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The iPad’s debut this Saturday will be a milestone for Apple, but it’s not going to do much to change the company’s overall financial picture anytime soon. That’s the word from Bernstein analyst Toni Sacconaghi, who worries that investors drunk on Apple’s “magical and revolutionary” Kool-Aid might have overzealous expectations for the tablet.

Which is not to say that Sacconaghi disputes the iPad’s potential as a market-defining device. He just wonders if there aren’t a bit too many unknowns at present to make hard and fast predictions about its sales trajectory.

“What will international pricing be?” Sacconaghi asks in a research note issued this morning. “What sort of media content will be available, and how quickly? How rapidly will Apple increase distribution beyond the 10 countries announced so far, compared to the iPhone which is available in 89 countries? How prevalent will non-Apple distribution be?”

Reasonable questions. And without answers to them, Sacconaghi is playing it safe with his sales estimates. He expects Apple (AAPL) to sell between 300,000 and 400,000 iPads over launch weekend–including pre-sales. But he figures the device will sell five million in its first full year at market and 6.8 million in fiscal year 2011.

“We note that the initial iPad launch will be a US only launch and will not include 3G models; we suspect that total (including pre-sales) first weekend sales will be slightly higher than the original iPhone’s first weekend (270K), given the iPhone had a similar price, and was US exclusive (although it did not offer pre-orders),” Sacconaghi writes.

“Our analysis suggests that iPhone sales run rates have fallen significantly (i.e., by a factor of 4x – 9x) following launch weekends; we think a drop-off in sales at the high end of this range is likely appropriate for the iPad, given that pre-sales will have boosted first weekend sales. Such a drop-off in iPad sales from our launch weekend forecast would result in unit sales for year 1 of about 5 million units in-line with our estimates.”

That might not be an “over-zealous” estimate in Sacconaghi’s eyes, but it’s certainly a bullish one. Still, the analyst concludes that the iPad’s near term financial implications for Apple may not prove to be as magical as investors hope.

“We believe that while the iPad may evolve meaningfully over time, we expect its impact on Apple’s earnings to be minimal during FY 10,” he says. “In the immediate term, iPad expectations appear over-zealous, which could provide a relative short-term disappointment for investors.”

FURTHER READING:

  • Launch Day iPads Sold Out
  • iPad Available at “Most Best Buy Stores” This Saturday
  • Apple Grabs iPad Trademark From Fujitsu
  • Apple Now Accepting iPad App Submissions
  • Early Supplies of iPad Accessories Dwindling?
  • Initial iPad Demand Greater Than Initial iPhone Demand
  • iPad TV?
  • Apple’s Tablet: Read Different?
  • Rumored Apple Netbook Actually an E-book?
  • Coming Soon From Apple: Big Touch?
  • iTablet: Apple’s Killer App for Higher Ed
  • COMPLETE IPAD COVERAGE

    • Tagged with: 2011, 3G, analyst, Apple, Apple Tablet Feature, Bernstein, bullish, content, debut, device, digital, distribution, earnings, estimates, financial, fiscal, forecast, hardware, innovation, international, investors, iPad, iPhone, John Paczkowski, market, pre-sales, predictions, pricing, research note, sales, tablet, telecom, Toni Sacconaghi, units, unknowns, weekend, year

    comments so far. Add yours.

    • techtrader10

      If you take a look at a daily chart for each of the last three days and again today you will notice the stock price was pumped up on the opening and the stock sold off from there. Since there are no floor brokers on the NASDAQ as there is on the NYSE, this is the way institutions get out of the stock at a high price. They pump up the price in the pre-market light volume trading and then sell into the short covering and momentum traders.

    • Anonymous

      Considering that the iPad is the cheapest (including inflation) of Apple’s launches, I am sure it will be successful

      http://the amazingipad.com/ipad

    • wq0

      thanx, u blog is so big )

    • http://fastforwardacademy.com/index-page-irs-enrolled-agent-exam-course.htm Mandi

      Nice post. I think it's true, expectations may be a little overzealous. But I also think that only time will tell, you know? It may turn out that they were right.

    • codefab

      iPadDevCamp NYC

      April 16th-18th at AOL

      http://ipad.eventbrite.com/

      GEEK OUT!

    • JohnDoey

      > questions

      The thing is, this is a new device, but it's also a big iPod if you want to look at it that way. Most questions about the iPad can be answered the same as iPod touch. If iPod touch costs 20% more than the US price in your country, expect to pay that much extra for iPad. iPad runs all the iTunes content, including content from the user's collection. It will sell wherever iPod touch is sold today.

      > short-term disappointment for investors

      The next milestone is when a critical mass of iPad-specific apps are available in App Store, and people will start buying iPads just to run a particular app, whether it's a game or productivity app or something unexpected. That isn't necessarily that far off since iPad apps are basically tweaked iPhone apps.

      Another milestone is institutional sales, because sales are limited to 2 per customer right now. There are lots of big companies with their own iPhone apps and fleets of iPhones who will get a bunch of iPads to run their updated apps. The US military has the largest collection of iPods in the world, and they were in Cupertino looking at iPads just a few days ago. There are schools who will want iPads.

      Me, I think they will sell a million a month this year, and 2 million a month next year and so on. If you invested in Apple because of iPad, then sit tight for a bit.

    • larspallesen

      Ehm what? This guy predicts Apple will sell 5 million iPads in 2010, and concludes: “We expect its impact on Apple’s earnings to be minimal during FY 10″ (??)

      Newsflash: If your first statement is true, that would make your second statement categorically untrue!

      Five million iPads in it's first year is MASSIVE. It's way more than the iPhone sold in 2007, and as we all know that had a huge impact on its earnings that year.

      And he is supposed to be some hot shot financial analyst? Sheeesh!