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11 Post-Christmas Ruminations on Apple and the iPad


Is it possible that iPad could be a market share category killer like the iPod was, and maintain an 80%-plus market share?

Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial).

My Apple (AAPL) concerns of a few weeks ago aside (I still think Android is now the monster that can't be stopped), I have a few new and old thoughts on the newest Apple sensation which I dubbed the iNetbookkiller upon it's release, as well as some new views on Apple as well.

These ruminations are coming about as I'm touring stores after Christmas and seeing what is still holding sway over consumers. At Best Buy (BBY) it seemed as though the whole consumer wave was centered around the iPad area and its accessories. At other locations it seems that a continually growing mass of products are being created to service the iPad, and they are selling out. And in the enterprise, this product is being sought after and coveted.

[Editor's note: Want to read a follow-up to this article? Check out Analysis of 11 Post-Christmas Ruminations on Apple and the iPad.]

1. The iPad is the standout tech product since the iPhone and the Droid OS being pared with winning designs from Motorola (MOT) and HTC.

Is it possible that iPad could be a market-share category killer like the iPod was? And maintain something like an 80%-plus market share?

3. Did you know that even while many analysts' estimates (for Apple) seem less attainable all the time (a primary concern of mine), the consensus growth for EPS is only 17.3% and revenues 16.5%?

4. The iPad will see much stronger enterprise acceptance than the iPhone.

5. Stiff competition will emerge with ultra compelling designs but my early estimate (through 2013) is that the rest of the "field" will be fighting for half of the pie as Apple will have the other half.

6. As stated some time back, the iPad will be a tremendous sales tool in the field. Moreover, those without one will fear a lower close rate.

7. The iPad is the Swiss Army knife of electronics. It combines entertainment, lifestyle management, and business/computing mobility. It's a lifesaver on a vacation as it is multiple devices in one. Heck, it's a great remote control. (For those with Comcast (CMCSA), you must try the Xfinity app for the DVR controls.)

8. How many per house? Will the iPad (and/or tablets) be like cars where the industrial world owns about two per household, or is this a multi-product item like televisions, where they are found in the majority of the rooms?

9. Amazingly, we are not yet seeing this product cannibalize Macs and Macbooks. Unlike many others, I do see this occurring in time, but this might not be a major negative as the iPad lifecycle is much shorter, resulting in multiples of product turnover versus Macs.

All this sets Apple up for additional catalysts and revenue streams from content distribution/management and more surprises from a product standpoint. I won't steal my own thunder here as I have more soothsaying to come throughout next year.

11. All this is causing me to re-think my long-held Apple target for the low-mid $400s. Central to this is my belief that Apple could and should trade at or above a PEG ratio of 1 after stripping out cash. Even at a PEG of 1, that is far from a premium valuation for one of the premium growth stocks on the planet. Currently Apple's PEG (less cash) is .7 so a move to 1 would put Apple firmly at my old target. A move to 1.15-1.25 would put Apple's shares well into the $500s.

For comparison, and disallowing for cash, F5 Networks' (FFIV) PEG is at 1.7 and Amazon's (AMZN) at 2.7 versus Apple at .85.

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