Apple's New iPads Should Lead To Record Sales In The December Quarter

At Apple ’s product announcement  yesterday Tim Cook said that earlier this month the company had sold its 170 millionth iPad. At the end of the June quarter Apple had sold 155.1 million iPads which means that the most iPads that it could have sold in the quarter was 14.9 million. The company has been selling about 1 million iPads a week which probably was a bit lower the past few weeks due to the rumors of new iPads being launched. I am increasing my estimate for the number of iPads sold from 11.5 to 13 million based on Cook’s keynote since we don’t know when during the month it hit 170 million. (Note my family and I own Apple shares).

For a good description of what is included in the new iPads check out Connie Guglielmo’s live blog of the event.  My overall summary is that while it is interesting (and to a degree disappointing) that Touch ID was not included in the new iPad and not having a Gold version would have been helpful, the overall lightness of the iPad Air and speed of the new chips will make them very strong sellers.

December quarter sales could hit 27 million

Apple’s new iPads and expanded line-up should provide a rebound in sales and increase its leading market share. While I haven’t had the opportunity to hold one the iPad Air seems like it will be a very strong seller.  It will also be helped by launching in 42 countries including China vs. the 34 countries that the iPad 4 and Mini were initially available in 2012. There will also be more carriers carrying the new iPads at their launch vs. a year ago.

The iPad Mini getting a Retina display should remove the major feature shortcoming that people were talking about. That positive will be offset some by its $399 price vs. the previous Mini now selling for $299. Overall better to have two products vs. one but if the original Mini stays strong it could hurt margins.

Last year Apple sold 22.86 million iPads during the December quarter. There are a number of factors that will help iPad sales and at least one that will inhibit them. Having a $299 price point for the first generation Mini will help along with a $399 iPad 2. Including China in the first wave and some channel fill will also help since there are four models being sold vs. two. Also this years Mini with Cellular will be available at first shipment vs. last year when there was a few weeks delay and only available in the U.S. at first.

Of course the newer models will be the big sellers with the biggest hindrance being the new Mini available later in November. That could dampen the number that are sold during the holiday season if it doesn’t ship until late in the month. Note that the first day of availability for the full-sized iPad is essentially the same between this year and last.

After taking all of this into account I’m estimating that Apple could sell 27 million iPads in the December quarter, an increase of 18% over last years 22.86 million. However the Average Selling Price dropping from $467 in the December 2012 quarter to $436 in the June 2013 quarter has led me to estimate that it will be $430 in the December 2013 quarter. This translates to revenue of $11.6 billion vs. last years $10.7 billion, an increase of 9% year over year.

iPads have the strongest buying interest

Yankee Group does a quarterly survey of 4,000 consumers aged 13 and over for their buying intentions. It found that 32% of consumers intend to buy an iPad with the second place of “Unsure/don’t know” coming in at 23%. Amazon’s was in third place with 8.5% and Samsung fourth at 7.7%. Google was fifth at 6.3% followed by Acer at 5.1% and Microsoft at 3.4%.

Carl Howe, Yankee Group’s VP of Research, said “While other manufacturers are also launching tablets this week— Nokia announced its tablet in Abu Dhabi and Microsoft started shipments of its Surface 2 tablets—we believe that this announcement will keep Apple in the lead in tablets. It now has a full family of iPad products: the iPad mini at U.S.$299, iPad mini retina at U.S.$399, iPad 2 at U.S.$399 and iPad Air at U.S. $499.”

Source: Yankee Group

Apple’s shares are up $4 (0.8%) today to $524 in a down market (S&P 500 down 0.5%) and have broken through its $514 resistance level. Sentiment seems to be more positive on them but it will be Monday’s earnings announcement that will determine the next significant move in the stock.

Source: StockCharts.com

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