Apple New iPad Sells like Hot Cakes
It has been a blockbuster opening for Apple’s (AAPL) new iPad, as reportedly three million units of the new device were sold in the first four days of its launch. Released on March 16, 2012, the new iPad was initially available for sale in 12 countries including the US. The tablet will be available for sale in another 24 countries from March 24, 2012.
This tablet, which carries some exciting new features, has been touted as the biggest catalyst for driving Apple’s growth story this year. The new iPad has a state-of-the art Retina display, a faster processor with the new A5X chip, quad-core graphics, five mega-pixel camera, high quality video display with 1080p HD video and 10-hour battery life.
Most significantly, the new iPad supports 4G LTE or Long-Term Evolution connectivity, which delivers approximately 10 times faster Internet speed than the 3G networks. The 4G LTE iPad is available from carriers such as Verizon Communication Inc. (VZ) and AT&T Inc. (T) in the US and on Bell, Rogers and Telus networks in Canada.
AT&T said that it sold record number of iPads and connections on March 16, 2012. Though Verizon did not share any details, yet we believe that the new 4G-enabled iPad will provide both these carriers’ better growth opportunities compared to Sprint Nextel (S), the other US carrier that sales Apple’s 3G-based devices.
We also believe that the enhanced visual capabilities and faster processing from its predecessors make the new iPad more attractive for gamers. In our view, the new iPad will further cannibalize the market share of the console gaming platforms, including Microsoft’s (MSFT) Xbox 360 and Sony’s (SNE) PlayStation.
Apple’s iPads constitute a significant portion of its total revenue and the company sold approximately 32.4 million iPads in fiscal 2011, boasting a massive 334.0% growth from fiscal 2010. The momentum continued into the first quarter, selling more than 15.4 million units, significantly higher than the 7.4 million units sold during the year-ago period. Recognized revenues from iPad and accessories during the quarter shot up 99.0% year over year to $9.2 million.
The release of the new iPad is expected to boost revenues for the current quarter and retain Apple’s dominance (62.0% market share in the FY11) in the tablet market. We believe that the latest variant will provide Apple a significant competitive edge over the likes of Samsung Electronics and Amazon.com (AMZN).
Meanwhile, Apple announced that it will pay a dividend of $2.65 per share beginning July 1, 2012. The company also announced a share repurchase program worth $10 billion, starting from the fiscal first quarter of 2013. With a cash coffer of approximately $98.0 billion, dividend and share buybacks were long demanded by investors. We believe that Apple’s new approach to bolster shareholders’ value will boost the stock price going forward.
Thus, we have an Outperform rating on Apple over the long term. Currently, Apple has a Zacks #1 Rank, implying a short-term Strong Buy rating.
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