Sterne Agee: iPad Mini Is Competition’s Worst Nightmare

| Apple Stock Watch

AT&T CEO Randall Stephenson might lie awake at night worried about iMessages (and clowns), but Sterne Agee analyst Shaw Wu told clients on Tuesday that the, "iPad mini is the competition's worst nightmare." Though Apple hasn't yet announced the iPad mini, Mr. Wu said that his checks with suppliers in Asia show an uptick in component sourcing for the device.

iPad mini Nightmare

The iPad mini Nightmare

He also said that pricing for the device will be key, noting, "We do not believe AAPL needs to price as low as US$199 to match [Google's] Nexus 7 and [Amazon's] Kindle Fire HD but believe a price point of $299 or $349 makes sense with its entry-level iPod touch starting at $199 and iPad 2 at $399."

In May, we made the case that $299 was a great price point for the iPad mini, though that was before the release of Google's Nexus 7, a development that could have an impact on Apple's pricing strategy.

The analyst cautioned that consensus estimates for Apple's iPad for the now-completed September quarter could be high at 17-18 million units. His own estimates are for 16.5 million iPads. For the December quarter, he is estimating 22.3 million units. Those estimates do not include iPad mini estimates because the device has not yet been announced.

Mr. Wu wrote the research note in part because his clients have been asking about the recent pullback on Apple's stock. Shares of AAPL are down roughly 9.4 percent since hitting an all-time closing high of $702.10 on September 19th, and more than 9.8 percent off the stock's intraday high of $705.07 on September 21st.

"We believe concerns are overdone and this appears to be a typical consolidation after a big run," the analyst wrote about the pullback. "From our supply chain checks, demand remains robust with improving production and the bottleneck moving to assembly of the iPhone 5 itself vs. component constraints. In addition, we are picking up much increased component activity with what appears to be for an iPad mini."

He also noted that iPhone 5 production has improved, and that the bottleneck has moved from component supply to final assembly. He said that, "it Is overwhelming demand that is causing lead times to remain at 3-4 weeks and low stock at the retail level despite increased production."

AAPL ended Tuesday lower at $635.85, down $2.32 (-0.36 percent), on heavy volume of 29.9 million shares trading hands.

Image made with help from Shutterstock.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.

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Comments

Geek

The Apple mini is entering uncharted territory.  Since when did Apple care about price and does an extra $50 or $100 really matter to it’s customers?  There is nothing to suggest that their ever has been any resistance to Apple fans about either price or for that matter only marginal improvements!  Apple customers have snapped up almost every new device that Apple sells with ony a couple minor exceptions.

Apple customers are typically well educated and with disposable income and the price of its products have not been a barrier.  You want to own a Apple product you pay and that is the end of the story.  Apple sells the IPad and customers not only have lined up to by every new and improved model, but then usually spend $40 + for a case plus Apple care.

The mini should be no exception assuming that a 7 sh tablet is of interest. It is hard to believe that the $100 less that big of a deal given the millions of I-Pad 1,2 &3 that have been sold.  I suspect that Apple will sell a large number of mini’s but Samsung, Nook, and Amazon will also continue to sell in large numbers.  There are many who are not addicted to Apple and many who have been put off by some of Apples cavalier practices.

Will the Apple mini be the competitions worst nightmare, I don’t think so Apple will be embracing a size that Jobs said was unacceptable and that may open the eyes of some who thought smaller tablets to be unacceptable.

iJack

Have you noticed that the analysts’ ‘acceptable’ price point keeps going up, week by week?
I have.
————————
I also noticed that your photo is misleading in the scale of the iPad Mini, unless that model’s hands are enormous, or Shutterstock knows something we don’t.  I’ve got decent sized hands, and I just copied the fingers’ positions of the model’s left hand, and put a tape-measure from the crook of my thumb to just beside the top joint of my ring-finger (the approximate locations of the screen’s diagonal corners).  It measured 5-3/8” which is way undersized, if the uniform rumors of a 7.85” screen are correct.

Try it yourself, Bryan.

Bryan Chaffin

The image was intended to be creepy and nightmarish, rather than to-scale. Note that the shape of the man is stretched and also out of scale. smile

iJack

The image was intended to be creepy and nightmarish, rather than to-scale.

To what purpose?  I saw it as ‘arty,’ rather than creepy.

Note that the shape of the man is stretched and also out of scale.

It’s blurred, but I think the scale is about normal, given that the man’s body is about two feet behind the hands.

aardman

@Geek who says Apple fans are not price-sensitive.

Apple has to price the iPad mini not just with Apple fans in mind but more importantly, to lure non-Apple fans away from the competition.  The pre-‘97 Apple catered only to Apple fans, the company almost died from that.

Terrin

I think Apple will get rid of the iPad 2. I am guessing pricing to start at $299 and go up to $399.

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